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Bitcoin Will See First Mining Difficulty Decrease in Three Months

Bitcoin fundamentals increasing, price stable

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Bitcoin will have its first mining difficulty decrease in over three months. The decrease reflects a lower network-wide hashrate which corresponds to lower mining revenues.

Within the next few hours Bitcoin will experience its first mining difficulty decrease in over 100 days.

Bitcoin mining difficulty chart
Mining difficulty by Coin Metrics

Since January, Bitcoin has seen, on average, gradually increasing mining difficulty. These increases are consistent with growing miner revenue — a combination of the 12.5 BTC block reward and transaction fees.

Miner revenues by
Miner revenues (USD) by Blockchain, Inc.

The upcoming decrease in difficulty is observable through a measurable increase in average block time. Mining difficulty adjusts every 2016 blocks. With a 10 minute block time this translates to a difficulty adjustment every two weeks.

That said, when the Bitcoin network hashrate is increasing, as it has over much of Bitcoin’s history (in line with growing prices), it results in block times lower than 10 minutes. Year-to-date the block time has actually averaged around 9.5 minutes.

Block time by BitInfoCharts
Block time by BitInfoCharts

Since Oct. 27 block time has increased above 10 minutes. This translates to a likely decrease in mining difficulty because miners are not producing enough hashes to find blocks at a more frequent rate.

Hashrate by
Bitcoin network hashrate by Blockchain, Inc.

As seen on the one-year chart (smoothed with a seven-day average) the network hashrate has fallen from 100,000 petahashes on Oct. 26 to 91,800 petahashes on Nov. 5, an 8.2% decrease. The drop should not be surprising. Given Bitcoin’s precipitous price drop since late September miner revenues from block rewards have suffered.

BTC/USD by TradingView
Bitcoin / US dollar (7-day simple moving average) by TradingView

At $8,000 per BTC the block reward would have only amounted to $100,000 versus $125,000 when the cryptocurrency was trading at $10,000. Right now the block reward totals roughly $115,000.

In light of the change in market conditions miners will turn off inefficient hardware. Miners will mothball mining models older than the S9 and reduce hashrate production in areas with higher electricity costs until Bitcoin once again rallies above $10,000.

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