Bitcoin price drops after difficulty adjustment increased by +2%, will reverse the trend?
Bitcoin price has been constrained in a downtrend over the few weeks, causing the price drops to $ 7,000, erasing all profits generated by the end of October.
Analysts noted that Bitcoin is currently trading at an important level of long-term technical support, which historically catalyzed major movements when enthusiastically protected by buyers.
Bitcoin price plummeted to $ 7,000 during the overnight drop
At the time of writing, Bitcoin is down 5% of trading around the $ 7200 mark, marking a significant decline from the daily high of nearly $ 8,000.
Bitcoin price today. Source: Coinmarketcap
Last night, Bitcoin price plummeted to $ 7,000, marking an extension of the decline that occurred yesterday when BTC drops from $ 8,000 to the area between $ 7,000.
In the short-term, it is highly likely that Bitcoin will halt this downtrend, as the range of $ 6,900 to $ 7,200 marks the cryptocurrency’s golden pocket, which may allow it to find some pressure. Buying is essential as a catalyst for a short-term rally.
Big Chonis, a well-known analyst on Twitter, talked about this support level in a recent tweet, noting that it’s a pity to break below this level.
“The “golden pocket” has been hit… it would be a shame to lose it as support,” he explained.
— Big Chonis⚔️Chonis Trading 🚀 (@BigChonis) November 22, 2019
In addition to touching the ‘gold bag,’ Bitcoin also visited the 89-week EMA, which is a price area usually protected by bulls and could catalyze a significant bull movement in the short-term.
Anderson, another well-known analyst on Twitter, talked about this possibility in a recent tweet, explaining that visits to the region are often followed by significant movements.
“Fight for the 89-Week EMA back in play for Spot BTC. It is an area that is often fought for and often produces large moves once the war is won”.
Difficulty adjustment increased by + 2%
Although Bitcoin has been battered and prices pushed to the low region of $ 7200, some analysts are still quite optimistic about the prospects of BTC.
Recently, difficulty adjustment increases 2% on the Bitcoin network. This could be a negative sign, but historical graph reviews suggest that a decrease in difficulty after increasing will indicate an uptrend.
Difficulty (diff) is a way to keep the average time between new blocks stable, as the hash power on the Bitcoin network changes.
Bitcoin was designed by Satoshi to keep the time between adding new blocks to the blockchain at an average of 10 minutes. As the hash power on the Bitcoin network increased, to keep this time constant, the difficulty in exploiting a new block must be increased. The difficulty is a measure of the difficulty for miners to solve Bitcoin blocks to receive BTC rewards.
Bitcoin’s mining difficulty adjusts after every 2016 blocks – about every two weeks. If the number of blocks mined during that period is less than expected, the difficulty will decrease, and vice versa, more blocks will be mined, which increasing difficulty.
As price drops, smaller miners tend to leave the market in an event called capitulation. To compensate, miners started selling their BTC to cover costs, resulting in more supply of demand and, consequently, more significant discounts.
However, when smaller miners invest, the difficulty continues to decline until the market is stable. Historically, once the difficulty returns, the market finds a bottom, and prices start to rise.
+2% difficulty adjustment: no miner capitulation.
Historically blue followed by yellow/red indicates a temporary downwards difficulty adjustment, hashrate & price have in the past increased from this point. pic.twitter.com/JAgECasC0P
— PlanB (@100trillionUSD) November 21, 2019
As the chart above shows, the difficulty has increased by 2%, a signal that miners have stopped exiting the market. Previous difficulty drops may have been surrender, but it may be too early to confirm.
With increasing difficulty, the chart shows that prices often follow a positive trend. Bending points like this in historical charts have always led to significant price increases.
Previously there were three increases longer than, which following such changes. As the miners return to the market and price stabilizes, the hash rate rises and price begins to rally.
PlanB first analyzed the difficulty adjustment after an alarmingly significant drop of 7% on August 7. After additional testing, this is not as negative as before. Such a price reduction has occurred many times, and if the difficulty increases significantly downwards, then the immediate trend is always a bull run.
More expectation on Bitcoin price after diff adjustment
Not only does PlanB expect Bitcoin to rally. Many analysts expect Bitcoin to increase in price after adjusting mining difficulty.
Analyst Joel shared a series of weeks of BTC appreciation on Twitter talking about when the top cryptocurrency saw a 10% increase in a day, followed by a positive day and a positive 7-day series. , the Bitcoin market gains a positive 30-day profit for 80% of the time. In the case of a 12% profit, we get a positive 30-day profit for 100% of the time.
$BTC Bullish week thread. 1/4
Here is why i’m BULLISH for the week.
When we get a 10%+ day
+Followed by a positive day
+AND a positive 7-day,
= We get a positive 30-Day return 80% of the time.
For 12%+, we get 100%. pic.twitter.com/l3spl1e9Q3
— Joel (@JofDom) November 18, 2019
Meanwhile, analyst Nunya Bizniz previously shared that with the difficulty adjustment, we will probably see the rate increase to 245%.
During the 2013 price increase, the price increased by 24,000% after adjusting the monthly difficulty. After that, in 2017, an increase of 8,700%. This time, the monthly difficulty was adjusted down in December 2018 and reached ATH of 13.69 trillion on October 24.
Just a glimmer of light?
However, others find that difficulty adjustment is just like a single exception. Instead of seeing a starting point again for smaller Bitcoin miners and troughs in the market, they only saw a glimmer of light on the overall chart.
These detractors show that the discount reflects a significant miner surrender. This process did not stop until the price popped up for the first time.
Until prices move back to positive levels, the smaller miners have to stand on the sidelines, unable to run expired machines. When prices rise, they can re-enter.
Although this scenario may be happening right now, the only highlight available for mining is difficulty and hash rate. The first indicator of mining movement into the market is difficult adjustment. While this is not a guarantee, keen observers will be able to determine what will happen next based on future hash rate adjustments.
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