Bitcoin mining difficulty hits new all-time high at 55.64 trillion hashes – why this is bullish for BTC price

A Bitcoin is mined / Source: Adobe

Bitcoin mining difficulty, a measure of how difficult it is to mine a block, has just hit a new all-time high of 55.62 trillion hashes, according to CoinWarz.

Bitcoin mining difficulty is automatically adjusted by the protocol every two weeks, or once 2,016 blocks have been mined, with these block intervals called epochs.

The Bitcoin network aims for each block to take 10 minutes to mine.

If mining activity increases during an epoch and the average time to mine a block is below this 10-minute target, the network will automatically adjust the mining difficulty at the end of the epoch.

If the average time to mine a block during an epoch increases above 10 minutes, the difficulty will also decrease.

The mining difficulty at an all-time high is a direct reflection of the increasing processing power of the bitcoin network as more miners enter the market to get a share of the bitcoin output (6.5 BTC per block) and the network’s transaction fees receive.

In fact, the network’s hash rate (a measure of processing power) reached an all-time high of around 414 TH/s earlier this month, according to Blockchain.com.

That’s an increase of more than 60% since the beginning of the year.

Here’s why increasing difficulty is bullish for bitcoin, according to Bitfinex

Bitfinex analysts argue that Bitcoin’s increasing difficulty is positive for the price.

“The increasing bitcoin difficulty may indicate that miners believe that the current price shows that the current price of bitcoin indicates a downward deviation of the true value of bitcoin,” analysts on the exchange told Cryptonews.com.

“Miners could be confident that the price of bitcoin will eventually bounce back as this can only be seen as a downside deviation from its actual value… Therefore, investing more resources to mine bitcoin at these prices could be extremely profitable for them. “

Miners are significant owners of the bitcoin supply, and if they are confident that prices will increase, it could reduce supply from a key segment of the bitcoin market.

Bitcoin (BTC) is currently on track to end August down more than 10%, its worst month of the year so far.

The cryptocurrency, which was last seen near $26,000, came under pressure this month after 1) macro headwinds amid rising US yields and falling US stock prices, and 2) technical selling after falling below its previous uptrend in the month Year 2023 and the 200-day daily moving average.

This has caused the cryptocurrency to reverse gains it made in June/early July when there was optimism that a Bitcoin ETF could be approved later this year/early 2024.

However, many believe that bitcoin price won’t stay at suppressed levels for long – not only are spot ETF approvals expected to boost institutional adoption in 2024, but bitcoin’s halving is also imminent ( historically a bullish catalyst) and a Fed interest rate cycle also appears to be on the horizon (possibly for the second half of 2024).

Typically, Bitcoin hits new all-time highs within a year of the halving (next is next April).

Given that this would mean a profit of almost triple over current price levels, it is perhaps not surprising that Bitcoin miners are doubling down on their commitment and investing.

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