Erik Weijers, 6 months ago

Network difficulty Bitcoin keeps climbing

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.

  • Adding mining rigs takes time. The main manufacturers of ASICS miners have been unable to meet demand for some time. So the current additional capacity might be a delayed response to Bitcoin's price increase in late 2020 and early 2021.
  • The difficulty has been in a constant bull market since the beginning of Bitcoin, with relatively small corrections. The Bitcoin mining difficulty has never fallen as much as the price in the past five years. When the price of Bitcoin crashed by more than 80% in 2018, the difficulty only fell by about 30%. A bigger drop came in 2021 due to the forced closure of miners in China.

What is the breakeven point?

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.

Featured articles
Four trading strategies for crypto
Bitcoin and Ethereum: what are the differences?
What determines the Bitcoin price?
Related articles
A trace on the blockchain: 10,000 Bitcoin related to Mt. Gox on the move

Nov 24, 2022

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.

Trade anytime, anywhere

Boost your trading impact and reaction time in over 80+ cryptocurrencies via instant access to your portfolio with the LiteBit app.

  • 2525 Ventures B.V.
  • 3014 DA Rotterdam
  • The Netherlands
More info
  • About LiteBit
  • Careers
  • Business account
  • Support
  • Sell
  • News
  • Education
Subscribe for updates

Sign up to stay informed via our email updates

Subscribe
Explore popular coins
© 2022 LiteBit - All rights reserved