The difficulty of mining Bitcoin reached a new all-time high of 26.64 trillion this week, as the Bitcoin network’s total hash rate reached a new high of 199 TH/s. While such a turn of events is entirely foreseeable given Bitcoin algorithms, they both occurred at a time when the price of Bitcoin is declining. Is this the start of the cryptapocalypse?
The difficulty of Bitcoin mining is automatically changed based on the cumulative compute performance of the Bitcoin network to avoid ‘oversupply’ or ‘undersupply’ of Bitcoin and the resulting reduction or increase in its value/purchase power (the estimated number of total Tera hashes per second). This is done to keep the time it takes to mine a block around 10 minutes. The difficulty of mining a coin grows as more nodes are added to the network, or lowers as fewer nodes are available. Every 2,016 blocks, the difficulty is changed (about two weeks).
The overall hash rate of the Bitcoin network plummeted from 180.666 million TH/s on May 14 to 86 million TH/s by July 4 after China stopped cryptocurrency mining in late May 21. According to Blockchain.com, the network’s overall hash rate is now 198.864 million TH/s, an all-time high. On January 21, the difficulty of mining bitcoin reached an all-time high of 26.64 trillion (up 9.32 percent from the previous high in mid-May) and will continue to rise as more mining machines come online, according to CoinDesk.
The price of Bitcoin grew as the Bitcoin network regained its performance since early July (as mining farms from China relocated to Kazakhstan, Russia, and even the United States), peaking at $67,582 in mid-November. However, Bitcoin now costs $37,962, down 44 percent from its November peak, as the Bitcoin network performs better than ever and the mining difficulty rises.
“Given the soaring price of bitcoin last year, miners booked ‘super profits,’ so they tried to get more mining capacity online as fast as possible,” said Jaran Mellerud, a researcher at Oslo’s Arcane Research, in a conversation with CoinDesk.”From July 2022 to December 2022, most of the largest miners have enormous deliveries of the Antminer’s newest ASIC Antminer S19 XP. These deliveries will make the difficulty soar throughout the whole of 2022.”
One of the things about Bitcoin is that its price no longer varies much depending on the number of Bitcoins mined, which explains why it can fluctuate between $67,000 and $38,000.