How the Bitcoin Difficulty Adjustment Has Boosted Miners’ Bottom Line
Data shows that the recent large negative adjustment in Bitcoin mining difficulty has given a significant boost to miners’ earnings.
Bitcoin miners observe large increase in earnings after difficulty reduction
According to the latest weekly report from Arcane Research, BTC miner earnings have seen a growth of 15% in the last seven days alone.
A relevant indicator here is the “mining hashrate”, which measures the total amount of computing power connected to the network.
This calculation can be considered as a representation of the competition present among the miners. Increasing values on the metric thus imply increasing competition between the individual mining machines.
It is a feature of the BTC blockchain that the “block production rate” (that is, the rate of hashing of new blocks) must aim for a constant value. However, when the hash rate changes, so does the ability of miners to produce blocks.
For example, an increase in the hashrate means that more rigs are present on the network now, and thus block production becomes faster. To counter this, the Bitcoin chain increases what is known as the “mining difficulty”.
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After such an adjustment takes place, the miners find it more difficult to hash transactions and the speed is therefore reduced to the required level.
Now, here is a chart showing the trend of the BTC hashrate over the past year:
Looks like the hashrate has gone down recently | Source: Arcane Research's The Weekly Update - Week 29, 2022
As you can see in the graph above, the Bitcoin hashrate has now fallen 15% from its all-time high set back in June.
A consequence of this decline has been that the mining difficulty has faced three consecutive adjustments, the last of which has been the largest adjustment in over a year.
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Thanks to the reduced difficulty, BTC miners have observed an increase in their earnings. Just last week, daily miner earnings had fallen below $18 million, the lowest value since November 2020.
The table below shows how the various BTC mining related metrics have changed over the past week.
The fees per day seems to have fallen by almost 4% during this period | Source: Arcane Research's The Weekly Update - Week 29, 2022
From the table, it is clear that miner earnings have increased by more than 15% in the last seven days, as they are currently at $20 million per day.
BTC price
At the time of writing, Bitcoin’s price is hovering around $21.4k, down 10% in the last week.
The value of the crypto has declined during the last few days | Source: BTCUSD on TradingView
Featured image from Brian Wangenheim on Unsplash.com, charts from TradingView.com, Arcane Research
