The mining difficulty for Bitcoin (BTC) has reached an all-time high, reducing the already diminishing profit margins of miners.
The new development could be catastrophic for crypto miners. As it also appears that the price of BTC is declining, Bitcoin miners may be going into a storm.
According to data from btc.com, a company that monitors BTC mining performance, Bitcoin mining difficulty has increased dramatically.
As noticed on Twitter by renowned cryptocurrency reporter Wu blockchain, the difficulty of mining the crypto has increased by approximately 5 percent to 31.25T.
This increase follows a roughly 5.6% increase two weeks ago, when the network’s difficulty surpassed the 29T area for the first time ever.
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Bitcoin mining is the process of confirming and adding a new transaction block (set) to the blockchain. The level of difficulty measures how complex it is to vie for mining payouts.
Network users that engage in the mining process (known as validators or miners) are rewarded with a fixed number of BTCs for each transaction block they successfully validate and add to the blockchain.
Seven-day moving average. Source: Bitinfocharts.com
In contrast, Bitcoin hashrate, or the network’s computing capacity, has remained virtually unchanged.
During the same two-week period, however, the profitability of Bitcoin mining decreased by approximately 13 percent.
During this time span, the price of Bitcoin decreased by 23 percent. The price decreased from approximately $39,390 on April 27 to the current level of $29,310, a Coingecko chart shows.
According to analysts, Bitcoin mining companies will be in significant danger if the cryptocurrency hovers below $30,000 for an extended period of time.
However, the greatest fear is not the BTC price falling below $30,000, but rather the duration of the slide, or how long the crypto will continue falling.
Based on data released by ByteTree, miners have spent much more of their newly created BTC than they held over the past weeks.
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BTC total market cap at $568 billion on the daily chart | Source: TradingView.com
Meanwhile, the majority of Bitcoin miners are currently shifting to Ethereum because of a higher return on investment as the network suffers significantly as BTC mining difficulty rises.
In 2021, when ETH broke through the $4,000 resistance, mining Ethereum got even more profitable. Moreover, as the launch of ETH 2.0 nears, the most sought after crypto asset is finding it increasingly difficult to maintain its dominant position.
With these developments coming up, an increasing number of miners are shifting to the Ether network and steer clear from unexpected crashes in the middle of their transactions.
Featured image from Yahoo Finance, chart from TradingView.com
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