Bitcoin Mining Difficulty Saw the Second-Largest Drop in Its History
Bitcoin has seen its mining difficulty decline to 13.91 T from a high of 16.55 T, down 15.95 percent at 2:51 UTC on Thursday, March 26, two weeks after the March 12 price crash. It is estimated that the mining difficulty will continue to drop, by 16.04% to 11.68 T in 14 days, according to BTC.com.
Since its inception in 2009, it is the second single largest reduction in difficulty in bitcoin history. The largest difficulty percentage drop in Bitcoin history dates back to November 2011 (down 18%), and the third-biggest drop was 15.13 percent, recorded in December 2018 amid a price crash at the time.
Bitcoin mining difficulty rate is a metric that shows how hard it is for miners to solve bitcoin blocks to receive the bitcoin reward. It is designed to be adjusted roughly every two weeks, or 2016 blocks, as the amount of miners increases or decreases.
When more miners contribute to the network’s hash rate, the difficulty increases. If miners stop mining en masse, the difficulty will decrease to make finding new block rewards less difficult, which will incentivize more participation.
In light of the recent price plunge, coupled with the record high mining competition at the time, a number of miners have to turn off inefficient mining models older than the S9 or reduce hashrate output in areas with higher electricity costs.
According to data from mining pool f2pool, 45 mainstream bitcoin mining machines had hit the shutdown price (below which they are unable to generate any profit) in the past two weeks, assuming electricity cost is at an average $0.05/kWh.
“About 2.3 million S9 machines have been forced to shut down since March 10,” f2pool estimated.
Coming two weeks after the price plunge, the difficulty drop offers a relief to bitcoin miners who have been going through a particularly hard time. Hopefully, some mothball mining machines may run again as the competition is less fierce now.
While considering the rollout of more powerful equipment and more mining rigs to operate in China to take advantage of the cheap hydropower brought by the upcoming rainy season, the competition ahead might be fiercely intense which could squeeze small miners further.