- Bitcoin mining difficulty has hit a record high, rising by 3.5%, increasing competition among miners.
- High operational costs are making it challenging for miners to remain profitable, especially with rising difficulty and reduced margins, an expert said.
Bitcoin mining difficulty has reached a record high, reflecting increasing competition among companies mining the cryptocurrency, according to data from crypto-mining tracker CoinWarz.
Related: Glassnode: Bitcoin Hash Rate Hits New Highs, Yet On-Chain Exchange Volumes Show Investor Hesitancy
Bitcoin mining difficulty is basically what it sounds like—it’s a crucial metric that quantifies the computational effort required to find a valid hash for a new block. The higher the difficulty, the harder it is to mine a block.
Uncertainty if Bitcoin Price Will Follow Rise in Difficulty
CoinWarz data shows that mining difficulty rose by 3.5% on Wednesday, continuing a trend that often correlates with expectations of price movements.
It’s uncertain if the price will follow, as uncertainty and volatility have gripped Bitcoin and the crypto market in the past three months or so. BTC is currently trading at US$57,913 (AU$89,736), an increase of 1.76% from yesterday. The coin has experienced tremendous volatility, reaching US$53K (AU$79.3K) last week.
Halving Puts Pressure on Miners Amid Struggles to Remain Profitable
The halving, combined with rising difficulty, has significantly pressured miners’ profit margins.
Christopher Bendiksen, Bitcoin research lead at CoinShares, warns that many miners, especially those with higher operational costs, may struggle to remain cash flow positive or even profitable if current trends continue, according to a report from Bloomberg.
The effect of the all-time high in difficulty, right on the back of the halving earlier this year, is making the outlook extremely challenging for many miners — especially those at the higher end of the cost curve. There are miners that will struggle to be cash flow positive, let alone profitable.
Christopher Bendiksen, CoinShares Bitcoin miners utilise specialised computers to validate blockchain transactions, earning rewards in the form of Bitcoin. However, shares of major US-based mining companies like Marathon Digital Inc. and Riot Platforms Inc. have plummeted this year, dropping 32.7% and over 50%, respectively.
Related: Largest Miner Marathon Digital Goes “Full HODL”, Adds to $1.28 Billion Bitcoin Stash
In July of this year, Marathon Digital added US$100M (AU$149M) worth of Bitcoin, readopting its full HODL strategy of adding BTC to its balance sheet. Strangely, the company did not disclose the date of purchase, which would give an idea of the average amount and potential returns today.
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