Bitcoin’s most recent mining difficulty adjustment broke the downward trend that started a few months ago. Since Christmas the network’s hash rate is finally increasing again, after it started declining early November. This means that slowly more mining machines are being activated to add their computer power to the Bitcoin network.
The bitcoin network has seen five downward adjustments to its mining difficulty in 2018. This caused some speculation about the future of bitcoin, with critics calling the coin ‘moving towards zero’. The upwards shift in difficulty happened on December 31st, and the hash rate has been increasing ever since. So despite the higher difficulty to get rewards, miners still turn their machines back online.
Late August the network peaked, as the blockchain reached a hash rate of 61.8 TH/s, according to data from Blockchain.com. After that moment growth was gone and the network stabilized between 50 and 55 TH/s, only to start a decline early November. One month later the network reached its bottom with 31.9 TH/s. Currently this hash rate is 42.1 TH/s.
Currently most bitcoin miners are still operating at a loss. A report from Bloomberg a few weeks back suggested that the break-even point for bitcoin miners is hit when the coin reaches $4500 in value. Only miners who are capable of significantly reducing their operating costs, can mine with a profit under current circumstances.
However, as long as a miner doesn’t sell right now, everything that he’s mining will increase in value when the market goes up. So what’s operating at a loss right, can become a profit later. The only rule needs to be that the bitcoin that was acquired stays in the miner’s possession.
The decline in the bitcoin and crypto pricing has forced many companies to downsize or close their business. At the same time more cyber criminals are using malware to mine cryptocurrencies, while gaming hardware companies try to make some money through crypto as well.
Chinese mining companies are in a bit of a pickle, as the electricity prices are currently at an all-time high. Only illegal mining operations can be profitable right now, even though the government is trying to shut them down. At the same time other countries, like Iran and Saudi Arabia, are being tipped as potential powerhouses for future mining operations. Electricity is very cheap in those countries.
Also published on Medium.