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Miners are encountering substantial difficulties, as bitcoin revenue per petahash has decreased by 50% from a peak of $70 to $35.
Data center servers (Taylor Vick/Unsplash/Modified by CoinDesk)
What to know:
- The mining difficulty for Bitcoin decreased by 11%, marking the largest reduction since the crackdown in China in 2021, attributed to declining prices and severe winter storms in the United States.
- Miners are facing considerable obstacles, with bitcoin revenue per petahash halving to $35 from a previous peak of $70.
- This difficulty reduction acts as a self-adjusting measure that could enhance profitability for the remaining miners and may indicate a market capitulation phase.
Bitcoin’s mining difficulty fell by approximately 11%, its largest decrease since China’s 2021 crackdown on the sector, following a significant drop in hashrate caused by falling prices and extensive winter storm-related outages across the United States.
Mining difficulty, which assesses the effort required to discover new Bitcoin blocks, adjusts roughly every two weeks to sustain a 10-minute block time on the network.
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The recent adjustment lowered the metric from over 141.6 trillion to roughly 125.86 trillion, based on data from Blockchain.com, indicating a substantial reduction in the number of active machines securing the network.
This decline follows a series of setbacks for miners. Bitcoin prices have significantly decreased from an all-time high of $126,000 in October to around $69,500.
This price drop has compelled many miners, particularly those operating outdated equipment and facing high energy expenses, to cease operations. Some have also reallocated their hardware to focus on artificial intelligence (AI), as major firms offer stable contracts with often attractive terms.
Bitfarms (BITF) notably experienced a surge in its stock price after announcing it is no longer focused solely on bitcoin but is instead concentrating on data center development for high-performance computing and AI tasks.
Bitcoin mining revenue on a per terahash basis, assessed via the hashprice, has significantly declined from nearly $70 during the cryptocurrency’s all-time high to slightly above $35 now.
Severe winter storms, especially in Texas, exacerbated the situation. Grid operators issued curtailment requests to conserve electricity for residential users. Public mining companies reduced production, with some reporting daily bitcoin output declines of over 60%.
While a decrease in difficulty may seem concerning, it serves as a self-correcting mechanism. For miners that remain operational, the diminished competition can enhance profitability and support the business model.
Historically, significant difficulty drops have also indicated market capitulation, frequently preceding a stabilization or recovery in price as miners liquidate the BTC they mine to cover operational costs.
