Bitcoin mining difficulty slides for the second time since the halving
Out with the old machines and unprofitable miners, in with the new.
The third Bitcoin halving was a jubilant occasion for all... except the miners who didn't make it. Mining difficulty slid once again this week, this time dropping a solid 9% to its lowest level since January 2020.
It marks the eighth biggest difficulty drop in Bitcoin's history.
That it slid twice in a row, in the absence of any outrageous price motion, suggests that Bitcoin had some miners hanging in there and working at a loss over the last two weeks, banking on a price rise to make it all worth it and that the rise never came.
The above chart shows hashrate (solid line) and difficulty (dashed line). We can see hashrates peaking around the time of the halving on 12 May, followed by a decline.
Interestingly enough, there was a big hashrate surge in late May as Bitcoin prices bounced back up from $8,000 and feinted at $10,000, and hashrates remained higher than they were from 15-24 May, even as Bitcoin prices remained lower.
Assuming it's not a trick of the light or some other fluke, and that we're not reading way too far into these squiggly lines, this suggests that miners were prepared to see Bitcoin prices go higher the second time around but not the first.
Alternatively, and probably more likely, it's a combination of the arrival of new machines ordered by the more financially durable miners, and the arrival of the rainy season in China that's dropping hydroelectric electricity prices.
Right now we're seeing some miners drop out of the Bitcoin mining game in the face of declining profitability, while others keep successfully ramping up the hashrate with new gear. On the face of it, one might feel like the mining business is doomed to consolidate over time as it becomes more and more competitive.
It's safe to say the next halving will be interesting, but very tough to say what the cryptocurrency landscape will look like by then. It has certainly changed a lot between 2016 and 2020.
Disclosure: The author holds BNB, BTC at the time of writing.