Bitcoin mining difficulty experienced a significant 7.8% drop on June 5, 2024, marking the largest decline since the collapse of the FTX exchange in 2022. This adjustment, which brings difficulty levels to those seen before the fourth block reward halving in April, is set to benefit smaller miners and mining pools, potentially leading to increased profitability.
Mining Difficulty Falls from 83.6 TH/s to 79.5 TH/s
According to Coinwarz, Bitcoin‘s mining difficulty fell from 83.6 terahashes per second (TH/s) to 79.50 TH/s, reaching levels last seen in March, just a month before the block reward halving. Terahash measures how many hashes a mining device, pool, or network can produce per second. This drop in mining difficulty reflects a decrease in the network’s hash power, indicating that some miners have shut down their devices due to low profitability.
The April block reward halving had a profound impact on miners’ revenues. An analyst noted that daily revenues dropped from $78 million before the halving to $26 million now. This significant decline has created financial pressure on miners, causing some to cease operations. However, the recent downward adjustment in difficulty may provide relief to those who have managed to stay operational.
For those unaware, mining difficulty is adjusted every two weeks based on the block production rate. This mechanism ensures that blocks are mined at a consistent rate and is adjusted up or down based on the overall network hashrate. The recent adjustment due to low network hashrate mirrors the impact seen after the FTX collapse in December 2022.
Miners’ Profitability Has Recently Dropped Significantly
CryptoQuant’s research director Julio Moreno highlighted that miners’ profitability has been significantly affected recently, emphasizing the impact of the drop in difficulty. He noted that some miners have turned off their devices in response to declining profitability, leading to the current decrease in mining difficulty.
The drop in difficulty means that smaller miners now have a higher chance of successfully mining blocks and earning block rewards in BTC. This adjustment could reactivate some mining pools that were previously shut down due to high costs and low profitability. Reduced competition may provide much-needed relief for miners, especially during North America’s summer months when operations are frequently interrupted.
Despite these adjustments, Bitcoin’s price only allows a few of the most efficient mining devices to remain profitable. This situation suggests that Bitcoin might be nearing its bottom, as miners and other entities continue to face selling pressure affecting market dynamics.
