Decreasing Bitcoin mining difficulty could give struggling miners a fighting chance

Bitcoin miners have seen their limits tested with the decline in profitability due to the falling prices. The increase in mining difficulty had also contributed to this as more competition meant miners had to fight harder and run further to find a block. It had led to some dire circumstances for the miners, who found it more difficult to continue their activities. However, there is now a shift as the difficulty of mining decreases.

Bitcoin mining difficulty is plummeting

The difficulty of bitcoin mining had grown throughout 2021. This was due to the profits realized from mining activities, which prompted more players to enter the area. This oversaturation of bitcoin miners had pushed up the competition, and mining difficulty had grown with it.

Since the mining difficulty was so high, miners achieved fewer returns at this time. As well as having to spend more money on electricity due to increased difficulty. To put this into perspective, at the height of the mining difficulty back in May 2021, miners had to use 204 MWh for an Antminer S19 to mine one BTC. This also takes into account that the Antminer S19 was the most energy efficient machine of all the miners.

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Fast forward to July 2022 and the energy required to mine one BTC has dropped to 175 Mph for an Antiminer S19. The trigger for this decline had been rising temperatures across the US which saw bitcoin miners shut down operations due to rising electricity prices.

Mining difficulty plummets | Source: Arcane Research

When these miners went offline, competition was reduced and this in turn led to lower electricity required to mine a BTC due to the machines not having to run as long to find a block.

What this means for miners

For many miners, the increase in bitcoin mining difficulty had come as a kind of death sentence. This was coupled with the fact that bitcoin prices had lost more than 60% of their value since hitting an all-time high in November. This meant that the cash flow to miners was greatly reduced while miners had to pay the same electricity bills, or even higher in some cases.

BTC retests $24,000 | Source: BTCUSD on TradingView.com

However, as the mining difficulty has dropped, so has it coincided with an improvement in the market. As of this writing, bitcoin’s price remains above $23,000, which means more cash flow on every bitcoin mined. This recovery has given some miners much-needed breathing room to conduct operations while pushing back the threat of bankruptcy.

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Now, this does not mean that miners are completely out of the woods. The crypto market is still in a bear market, which means prices can reverse as quickly as they recover. However, if the price of bitcoin continues to recover and the difficulty decreases, miners may be able to continue their operations until the next bull market arrives.

Featured image from Kapersky, charts from Arcane Research and TradingView.com

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