New all-time high for bitcoin mining difficulty
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The difficulty of bitcoin mining has risen above 20T for the first time in history.
This parameter regulates the difficulty of the work that needs to be done to confirm blocks, so that on average one block is mined every 10 minutes or so.
Due to the strong increase in the value of BTC in recent weeks, the profitability of mining has increased a lot, back to the levels of August 2019, when the speculative mini-bubble due to Facebook’s announcement of Libra was about to end on the price of bitcoin.
This level of profitability is more than three times higher than in October 2020, and has therefore prompted miners to increase the computing power dedicated to this activity. The result was a significant increase in hashrate, which caused the block-time to fall to 8 minutes.
Until December 26th, 2020, the block-time had remained around 10 minutes, but with the increase in the value of BTC from $25,000 to $40,000, the profitability of mining literally exploded, resulting in an increase in hashrate and a reduction in block-time to 8 minutes.
Bitcoin mining, the difficulty at 20T
At this point an increase in difficulty was inevitable, and the latest of these increases, which took place on Saturday, January 9th, took the difficulty above 20T for the first time in history.
This absolutely necessary and unavoidable increase will increase the block-time, but will not necessarily bring it back to 10 minutes. If this does not happen, it is expected that the next update of the difficulty, which should take place between January 22nd and 23rd, could increase it further, by between 2% and 8%.
However, if the price of BTC continues to fall in the meantime, it is possible that the profitability of mining will return to December levels, causing miners to reduce the amount of computing power they use, resulting in a spontaneous reduction in block-time.
It is useful to remember that updates to the difficulty, and its value, do not affect the price of bitcoin, and that the opposite is true.
In fact, as described earlier, the price directly affects profitability, which in turn indirectly affects hashrate and block-time, producing inevitable automatic adjustments to the difficulty in order to keep the block-time around 10 minutes.
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