Tough market conditions continue to affect the Bitcoin $16,960 ecosystem as mining difficulty drops by its biggest margin since July 2021.
A 7.32% difficulty adjustment took place on Dec. 6 at block height 766,080, marking the sharpest drop in difficulty in over a year. This coincided with a drop in average hashrate from 264.18 EH/s to 245.10 EH/s, according to data from BTC.com.
Bitcoin’s mining difficulty automatically adjusts to the amount of hashing power available to the network, essentially controlling the rate at which new Bitcoin blocks are added to the chain to an average of 10 minutes.
The difficulty adjusts every 2,016 blocks, meaning that this latest drop in difficulty will last around two weeks.
The adjustment could be seen as reprieve for Bitcoin miners that have had to endure a tumultuous 2022 which has left some small and large operators with no choice but to shut-up shop.
As previously reported by Cointelegraph, the third quarter of this year saw increased cost to produce new BTC coincided with dropping value of the preeminent cryptocurrency. Rising energy costs dug further into miner profit margins in the U.S. and Europe, leading some operations to shut down.
The revenue of Bitcoin miners fell to two-year lows at the end of November, exacerbated by poor cryptocurrency market performance and heavier computational demands. This eventually led to capitulation of some mining operations which has led to a recent drop in hash rates which accounts for the latest difficulty adjustment.
Bitcoin mining analyst Jaran Mellerud shared his thoughts in a Twitter thread on Dec. 3, highlighting that the most recent drop in hashrate is most likely due increasing electricity prices:
“Many miners operate close to cash flow break-even and will be forced to turn off their machines if market conditions worsen.”
Mellerud also argued that significant increases in hashrate up until Q2 2023 could be expected if the price of Bitcoin rises through the end of the year.