Erik Weijers, 6 months ago
The difficulty of the Bitcoin network keeps setting records. It continues to rise, in a fairly straight line. The difficulty has increased by 30% since the beginning of 2022. This means that Bitcoin miners worldwide have an additional 30% of capacity on aggregate. And thus, per unit of computing power, are paid 30% less Bitcoin for their effort. How can that be profitable while the price of Bitcoin is falling?
The amount of Bitcoin issued per block is currently 6.25. That issuance must remain constant, which is why the Bitcoin network adjusts the difficulty every two weeks (every 2016 blocks, to be exact). This difficulty has been rising with a more or less straight line since the summer of 2021.
The rising difficulty implies that miners worldwide have been adding extra equipment like a madman over the past year. High difficulty is good for network security but makes it more challenging for miners to be profitable. Why did they start mining harder at a time when the price of Bitcoin has been falling? There are a number of reasons for this.
The fact that the price of Bitcoin has fallen will not worry most miners yet. According to the CEO of Marathon, a large US-based miner, the Bitcoin price at which they break even is $6500. For ordinary miners though, who cannot mine on such a large scale, that price will be higher.
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In 2014 Mt. Gox which was the biggest Bitcoin exchange world wide at that time went bankrupt. The aftermath was a disaster since the platform got hacked earlier and an amount of 744,408 BTC left a gigantic hole in the company’s balance sheet. Over 8 years later some of these stolen coins are all of a sudden on the move.
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While blood runs through the streets in the current bear market, we continue to see branches of hope sprouting up. We see an emerging class of thinkers and advisors among the young generation of intellectuals. Bitcoin intellectuals. One is from Harvard and one from MIT. The latter will advise the US government.
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Edward Snowden is yet another prominent Bitcoin proponent, who lives in exile and often publicly comments on current events via Twitter. This time he wasn’t concerned about the state of affairs with FTX and all the buzz that is going through the media, but with the current price of Bitcoin.
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There is not a lot of good news available lately, but it seems that one particular player in the market is keeping up the good work. El Salvador is a small country and not economically powerful. Nevertheless, its president Nayib Bukele came up with yet another powerful plan.