Bitcoin is getting harder to mine as its hash rate recovers and price momentarily crosses $40,000
- Mining for
Bitcoinis likely to get more difficult as August rolls in.
- Bitcoin's hashrate, which determines the total computational power required to mine a coin, has improved by a whopping 15% since its massive crash in June.
- The recovery is led by miners who migrated out of China in search of greener pastures, coming back online.
According to US-based mining company Luxor’s weekly newsletter, Bitcoin’s mining difficulty is likely to increase as August kicks in. “For the first time since China’s hashrate went lights out, we’re anticipating next week’s adjustment to be positive, a roughly 1.75% increase,” said the report.
When Bitcoin is easier to mine, it means that less energy is being used, which, in turn, means the process becomes cheaper for miners. They are able to mine more with the same computational power and increase the chances of hitting gold — or, in this case, Bitcoin.
Bitcoin’s hashrate has already increase
Bitcoin briefly breached the $40,000 mark on July 27 at 11:30am Indian Standard Time (IST), recording a one-day rise of more than 7% — a welcome relief for investors hoping that the cryptocurrency would recover from its $30,000 rut, after correcting its mid-April peak of more than $60,000.
On the other hand, Bitcoin's hash rate, which determines the total computational power required to mine a Bitcoin, has also improved by a whopping 15% since its massive crash in June and now stands at almost 100M terahashes per second (TH/s).
If the hash rate increases, the difficulty of mining a block of Bitcoin also increases. Since more and more miners are trying simultaneously, Bitcoin’s in-built algorithm automatically makes it harder to unlock a block.
The measure helps in controlling the supply of coins and prevents a sudden flow of too many of them. For the community, it’s a positive indicator as it means the network is recovering from its pitfall.
However, for individual miners, it spells bad news as they will have to spend more time mining a coin than earlier.
Chinese miners are making a comeback
The last few months have been a rough ride for Bitcoin and all other cryptocurrencies as short-sellers exited and traders grew confident from a flurry of positive news from crypto stalwarts.
However, no event has had a bigger impact than China’s crackdown.
The increase in difficulty will primarily be driven by Chinese miners coming back online. Most of them have found new homes in other countries, set up their rigs, and won’t have any reason to back offline unless another regulatory crackdown affects their region.
The rise in hash rate signifies that the great miner migration effort is finally paying off. Miners have started moving their equipment out of China and are actively reopening business on the other side of the world — most of them reportedly in the US. It's where green energy is abundantly available, and government regulations won't be turbulent.
China used to contribute up to 65% of Bitcoin's total hash rate before the crackdown. The exodus of miners created a sudden drop. With miners gradually coming back up online, the hash rate is expected to recover steadily in the coming weeks.
An increase in the number of people mining Bitcoin is not the only factor that allowed the cryptocurrency’s price to escape the $30,000 limbo.
What's powering the rise in Bitcoin's value?
The initial push came when it was revealed that Amazon was considering payments in Bitcoin. A job listing, followed by confirmation from a source, hinted that the e-commerce giant could be exploring the space actively. The news has since been denied by the company, but it was still enough to rally the crypto markets.
Meanwhile, the US Treasury has also been actively discussing regulations for stablecoins, which have often been criticised for being non-collateralised.
The secretary underscored the need to act quickly to ensure there is an appropriate US regulatory framework in place. The PWG (President's Working Group) expects to issue recommendations in the coming months
The government's stance is seen as good news for the larger crypto community since regulations also mean standardisation. At a time when countries like China are toeing the line of an outright ban, regularisation efforts are at least a way for cryptocurrencies to coexist with the current financial system.
Around the same time, Tesla CEO Elon Musk confirmed that the electric vehicle company would most likely accept Bitcoin as payment when mining for cryptocurrency is powered by 50% or more green energy.
Considering the miners' migration attempts to the US, experts are bullish about the future. Energy consumption has always been Bitcoin's Achilles heel, and China's crackdown could as well be a boon in the long run.
For a more in-depth discussion, come on over to Business Insider Cryptosphere — a forum where users can deep dive into all things crypto, engage in interesting discussions and stay ahead of the curve.
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