The bitcoin mining difficulty had adjusted upward for the majority of 2022, recording its highest correction in the same year. However, 2023 kicked off with a downtrend as the mining difficulty has begun to drop. A sharp drop in this metric recorded in the early hours of Tuesday could be the start of a trend reversal in this regard.
Bitcoin Mining Difficulty Plunges
The bitcoin mining difficulty declined suddenly on Tuesday morning during Asia hours. Data from CoinWarz shows that it had fallen almost 3.6% in a sharp downward correction. This took the mining difficulty from the 35.36T that it was trending at to 34.09T following the adjustment.
The bitcoin mining difficulty is important in the fact that it actually measures how much power is needed to verify transaction blocks on the network. The higher this figure is, the more demand it shows for the bitcoin network. And the lower it becomes, it means there are fewer miners on the network.
One factor that has had a profound effect on the mining difficulty in the last month was the blizzard that blew through the United States. As temperatures dropped dangerously low in some places, miners had to disconnect their machines to free up the energy grid. This was in a bid to leave enough energy for citizens to power their homes.BTC price at $16,700 | Source: BTCUSD on TradingView.com
Impact Of This On BTC
The bitcoin price is still stalling despite the sharp downward correction in the mining difficulty. The digital asset is still trending in the mid-$16,000s and has refused to budge. Even the return of some momentum with the new year has not been enough to trigger a movement beyond this point.
So when looking at the broader picture with the difficulty adjustment and price, it does not look like there would be any profound effect on price. Also, miners are still seeing similar profitability in their mining operations, so there is no tipping of the scale toward sell-offs or holding.
As long as the price continues to hold up above the $16,600 level, there should be no downtrend in price. Although if it does break below this support, then $16,000 is more likely than $17,000 in the short term. Also, add in the fact that there are multiple events such as the DCG and Gemini debacle unfolding over the next month, and it becomes imperative for the cryptocurrency to hold support.
Bitcoin was changing hands at a price of $16,700 at the time of this writing. It remains the largest cryptocurrency in the sector with a market cap of $322 billion.
Featured image from CoinDesk, chart from TradingView.com