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Bitcoin Mining Difficulty Drops Slightly as Halving Approaches

Bitcoin has experienced a minor decrease in its mining difficulty, a measure of how hard it is to find a new block and earn the reward. According to data from Newhedge and Coinwarz, the current BTC difficulty is 79.35 T, down by 3% from the previous adjustment.

This is the second time this year that the difficulty has gone down, following two of the highest increases in the past 12 months, at around 7% and 8%, respectively. The difficulty adjusts every 2016 blocks, or roughly every two weeks, to maintain a 10-minute average block time.

Difficulty Adjustment Percent Change | Source: Glassnode

The reason for the slight drop in difficulty is likely the fluctuation of the hash rate, the total computing power of the network. The hash rate has been on a steady rise for the past few months, reaching an all-time high of 595 EH/s on Feb. 28, 2024. However, in the last two weeks, the hash rate has dipped slightly, averaging at 582 EH/s, as per the seven-day moving average.

The hash rate is influenced by various factors, such as the price of bitcoin, the availability and cost of mining hardware, the electricity cost, and the network congestion. Some miners may switch off their machines or switch to other coins if the profitability of mining bitcoin decreases.

One of the most anticipated events in the bitcoin community is the halving, which is expected to occur on Apr. 20, 2024, according to the Clarkmoody dashboard. The halving is when the block reward, the amount of new bitcoins created per block, is cut in half. This happens every 210,000 blocks, or roughly every four years, to control the inflation of the coin.

Hash Rate | Source: Glassnode

The current block reward is 6.25 bitcoins, which means that miners earn about $375,000 per block at the current price of $60,000 per bitcoin. After the halving, the block reward will drop to 3.125 bitcoins, which means that miners will earn about $187,500 per block, unless the price of bitcoin increases significantly.

The halving is seen as a bullish event by many investors, as it reduces the supply of new bitcoins and increases the scarcity of the coin. Historically, the price of bitcoin has surged in the months following the previous two halvings, in 2012 and 2016. However, there is no guarantee that the same pattern will repeat itself, as the market conditions and the competition are different.

The bitcoin mining industry is facing many challenges and opportunities, as the difficulty, the hash rate, and the halving are constantly changing. The miners who can adapt to these changes and maintain their profitability will likely survive and thrive, while the others may have to exit the market or consolidate with larger players. The future of bitcoin mining is uncertain, but also exciting, as the network continues to grow and evolve.

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