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has been on an impressive upward trend, pricing in small fluctuations for most of the last two months. When Donald Trump won in August, prices topped $70,000, surpassing 2021 highs, and within days the $100,000 mark was within reach. It was a historic achievement.
As Bitcoin continues to hold above this psychological level, something else is unfolding, something completely expected. An analyst has observed a steady increase in Bitcoin mining difficulties since August last year.
As of August 2024, mining difficulty has actively increased, with quarterly changes in difficulty going from negative values to +24%.
This indicates that miners are actively deploying new equipment, which increases the overall hash rate of the network. Essentially, this… pic.twitter.com/uVfsMl9TLh
— Axel
Adler Jr (@AxelAdlerJr) January 21, 2025
This means that mining Bitcoin (BTC) has become more difficult for miners and the quarterly difficulty adjustment has gone from negative to approximately +24%. Many in the industry had predicted this rapid change.
In early August, Bitcoin prices fell, falling below $50,000 and bottoming at $49,000. Many thought the fairytale rally of 2021 had come to an end.
However, momentum changed rapidly from then on, allowing Bitcoin to regain and consolidate its position above $55,000 to $60,000. This recovery coincided with a dramatic expansion of mining difficulties.
Bitcoin Mining Difficulty: A Sign of Bitcoin Strength
Changes in Bitcoin mining difficulty are often closely correlated with price movements. When prices rise, mining becomes more challenging as miners dedicate more resources to maintaining a steady flow of coins.
This mechanism is exactly how Satoshi Nakamoto designed the network.
The mining difficulty prevents the network from dispensing 3,125 BTC approximately every 10 minutes without adjustments. From January 22nd mining difficulty has reached the new historical high of 110 thousand billion.
(Source)
Every time mining difficulty increases, farms require more computational resources and energy, resulting in higher operating costs.
The silver lining for ordinary users is that, as long as miners remain active, regardless of spot prices or difficulty, the Bitcoin network remains stable and secure, ensuring seamless value transfers at all times.
And for this, the mainnet rewards them for their efforts through block rewards and block fees.
Difficulty, hash rate and profitability
The way Bitcoin is designed, adjusting in response to price changes is difficult. A surge in prices often signals greater demand for the network, which increases the difficulty.
As the network recently halved mining rewards, mining farms are now allocating more resources and streamlining operations to maintain profitability. In the coming years, the majority of their revenue will come from transaction fees rather than block rewards.
Despite record mining difficulties and reduced rewards compared to last year, miners are currently highly profitableperhaps because only a few large mining pools and agricultural companies now operate.
Mining is currently dominated by a handful of mining pools, with Foundry USA and Antpool leading the pack and collectively contributing over 50% of the total hash rate.
(Source)
Second Glassnode datathe average cost of mining a single Bitcoin is less than $35,000, compared to the spot price of $105,000 on exchanges like Binance.
(Source)
Each halving cycle eliminates the weakest miners. While this may temporarily reduce the hash rate, as observed in April 2024, it typically recovers steadily over time.
(Source)
Currently, the hash rate mirrors the increasing difficulty, coming in at 786 EH/s, slightly below the all-time high of 817 EH/s.
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