Bitcoin mining difficulty has reached an all-time high of 53.91 trillion units after the latest difficulty adjustment on July 12, according to a news article on CoinTelegraph. Mining difficulty is a measure of how difficult it is to mine Bitcoin blocks.
The blockchain adjusts its difficulty every two weeks to maintain a processing time of 10 minutes. When the network’s processing power increases, the difficulty adjusts to make mining challenging, reducing profitability for individual miners.
This latest adjustment adds to the pressure on miners who have been selling off their mined BTC since June. Analysts suspect that the lack of miner accumulation has likely restricted an uptrend in BTC price.
The increase in difficulty will likely drop the profitability of medium and small-scale miners into negative territory, forcing them to temporarily turn off some of their ASIC miners. This potential capitulation of weaker miners could provide an opportunity for larger miners to accumulate Bitcoin and reduce mining selling pressure.
Charles Edwards, an independent analyst, has created the Hash Ribbon indicator, which tracks the 30 and 60-day moving average of the network’s hashrate. When the 30-day MA falls below the 60-day MA, it signals that miner capitulation may be occurring. The two lines of the indicator are marginally close to a crossover, and the increase in difficulty may finally provide the catalyst for the capitulation of weaker miners.
The exodus of weaker miners would bring more rewards for the more efficient miners, potentially allowing them to save a portion of their output instead of selling.
Miners have been seen unloading record amounts of BTC to exchanges in recent months. According to a K33 Research report, publicly listed miners sold 100% or more of their output in May. The 30-day cumulative transfer volume from miner wallets to exchanges also spiked to a six-year peak in June and July, indicating that miners continued to unload their Bitcoin at an alarming rate.
The one-hop supply of miners, representing the total amount held in wallets that received coins from mining pools, also dipped to one-year lows. This suggests that miners have been uploading more coins than their production output.
While miners have been selling, Bitcoin whales have been accumulating. The most prolific BTC investors, known as whales and sharks, have increased their holdings by $2.15 billion since June 17. Additionally, Bitcoin held by exchanges has fallen below 2017 levels, indicating that investors are moving the BTC off exchange and increasing its illiquid supply.
The accumulation of Bitcoin among whales has previously pushed the price of BTC higher, but this time, the price has remained suppressed in a narrow range between $29,500 and $31,500, which could be partially due to miner selling pressure.
In conclusion, the latest increase in Bitcoin mining difficulty has put additional pressure on miners who have already been selling off their BTC. This could lead to the capitulation of weaker miners and potentially allow larger miners to accumulate Bitcoin. However, the price of BTC has remained suppressed, possibly due to the selling pressure from miners.