mining computers

Written by Erik Weijers 2 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.

Trade anytime, anywhere

Boost your trading impact and reaction time in over 70+ cryptocurrencies via instant access to your portfolio with the LiteBit app.

App StoreGoogle Play Store
App StoreGoogle Play Store
download-app