Bitcoin Difficulty Adjustments Lead to Hashrate Recovery

The data shows that the most recent downward adjustment in Bitcoin mining difficulty has resulted in the hashrate seeing an upward bounce.

Bitcoin Mining Hashrate has seen an increase during the last two weeks

According to the latest weekly report from Arcane Researchhashrate has increased after the largest decrease in mining difficulty in a year.

“mining hashrate” is an indicator that measures the total amount of computing power connected to the Bitcoin network.

Higher values ​​of the metric usually lead to faster blockchain performance, and a greater degree of decentralization of individual machines leads to stronger security.

The hashrate can also be thought of as a representation of the competition between individual miners. Thus, higher the price of the index, higher the competition miners face.

A feature of the Bitcoin network is that it tries to maintain a constant “block production rate” (which basically means it tries to keep transactions per day constant).

However, when the crypto’s hashrate fluctuates, so does the block rate. For example, if some miners disconnect from the network, the rate of hashing transactions slows down and fewer of the necessary blocks are mined.

To counter this, what the blockchain does is that it lowers the “mining difficulty” of the network so that miners find it easier to solve their computational puzzles and hash their transactions closer to their desired percentage.

Now, here is a chart showing the trend of the average 7-day Bitcoin mining hash over the past year:

The value of the metric seems to have observed some rise in recent days | Source: Arcane Research's The Weekly Update - Week 30, 2022

As you can see in the chart above, the Bitcoin mining hashrate had been down for a while, until about two weeks ago.

Due to this steady downward trend, the network difficulty has seen three consecutive negative adjustments, the last of which was the largest such change since a year ago.

The reason behind the reduced hashrate was the diminishing returns for miners, mainly caused by the drop in BTC price this year.

But since the difficulty has seen a significant decrease, the hashrate has increased a bit. This is because a lower network difficulty results in higher revenue for miners.

However, the block production rate has now increased to higher than required, so the next adjustment is expected to bring more difficulty for miners again.

BTC price

At the time of writing, the price of Bitcoin is hovering around $23.3k, up 9% over the past week.

Looks like the value of the crypto has been mostly consolidating sideways during the last few days | Source: BTCUSD on TradingView

Featured image from Dmitry Demidko on Unsplash.com, charts from TradingView.com, Arcane Research