Bitcoin must go on!
The Bitcoin mining difficulty, block frequency and hash rate – how were they affected by the coronavirus, and what’s the future of mining amid the lockdown? Discover in BTCMEX Blog.
Bitcoin is currently trading in a range of $6,000 – $7,000 and is still significantly down in comparison with the price-performance just several months ago. In correlation with the stock markets, the price has tanked almost twice after the BTC/USD 10k spike witnessed on February 9, 2020.
Several days ago, on March 26, 2020, the Bitcoin community has seen the biggest mining difficulty percentage drop in the last 9 years, with the adjustment of nearly 16%. The mining difficulty is the indicator of the competition among Bitcoin miners. The network adapts to the changing mining power on the network, keeping its issuance rate at a fairly steady level.
The executive chairman of CoinShares, Danny Masters, stated that Bitcoin is arguably the only financial asset that can operate remotely — nobody needs to go to work to make bitcoin work. It was proved earlier as several mining firms located in China reported that they were operating as usual even during the coronavirus quarantine that started in the country back in January.
In essence, three criteria define if mining is still a profitable activity. They are the price of Bitcoin, the cost of electricity, and the overall difficulty, that changes according to the hash rate. The Bitcoin sell-off that started in March, followed by the price drop, meant that it was no longer profitable for some miners to continue operating, so they shut off their machines. As soon as they did so, the difficulty began to drop. Lower hash-rate means lower difficulty, so the miners who remained in the game saw a corresponding, although not identical numerically, increase in their profitability over time as the network adjusted.
The Bitcoin halving is a couple of months away. The event is programmed to slash the block reward by half and is expected to happen in mid-May 2020.
There are predictions that some of the higher-cost miners may drop out after the halving, but the mining companies stabilizing and building for the foreseeable future. Only companies that are better prepared and have access to additional capital and higher profit margins are able to stay on the network even with reduced profits or temporary losses.
In the meantime, things are going back to normal, as miners that have managed to stay afloat can mine with reduced difficulty and enjoy cheaper production costs due to reduced difficulty which will take nine more days to adjust to the hash rate growth.