Bitcoin mining difficulty hits new ATH: What caused it?

27 August 2023

in Mining

Reading Time: 5 mins read

Bitcoin’s network hash rate bumped to a 4-month high.
Miners delayed selling their holdings due to their belief in the growth potential of BTC.

Bitcoin’s [BTC] miner activity is closely tracked by experts in the crypto ecosystem, as it provides vital clues into the network’s health and the level of profitability in the mining sector.

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As per a post by on-chain analytics firm Glassnode, the network hash rate bumped to a 4-month high on 26 August. The previous 4-month peak was recorded more than a month ago on 7 July.

📈 #Bitcoin $BTC Hash Rate just reached a 4-month high of 1,016,562,908,660,169,965,568

Previous 4-month high of 968,386,423,095,645,962,240 was observed on 07 July 2023

View metric:https://t.co/idoCHWnGEn pic.twitter.com/ITJM5RwJD5

— glassnode alerts (@glassnodealerts) August 25, 2023

Miners switch on their machines

An increase in hash rate implied that more computational power was dedicated to validating the transactions and securing the network. The entry of more miners or use of more efficient machines generally leads to a spike in this metric. Overall, the increase is a healthy sign with regard to security and decentralization of the network.

The jump in hash rate propelled the mining difficulty to all-time highs over the past week. The mining difficulty adjusts automatically roughly every two weeks in order to keep the total block time at 10 minutes.

Source: Glassnode

In a statement shared by Bitfinex analysts to AMB Crypto, they revealed that the increase in mining difficulty was rooted in miners’ bullish expectations from Bitcoin.

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“Miners could be confident that the price of Bitcoin will eventually rebound as this can be seen as a mere downwards deviation from its real value. Hence investing more resources to mine Bitcoin at these prices could be highly profitable to them.“

Are miners bullish on BTC?

The analysts further stated that miners delayed selling their assets due to their belief in the growth potential of BTC.

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Glassnode’s data supported the above insights. It revealed that the total supply stored in miner addresses reached a monthly high of 1.83 million as of 26 August.

📈 #Bitcoin $BTC Miners’ Balance just reached a 1-month high of 1,831,069.286

Previous 1-month high of 1,830,669.079 was observed on 21 August 2023

View metric:https://t.co/cHhwgaCLee pic.twitter.com/fJj58NC498

— glassnode alerts (@glassnodealerts) August 26, 2023

Read Bitcoin’s [BTC] Price Prediction 2023-24

Remember that miners frequently cash out to meet their mining and power costs. A delay in liquidations generally means that they are waiting for Bitcoin’s price to gain more strength.

Miner earnings decline

Miners’ optimism about Bitcoin was a refreshing sign, especially in a phase when earnings have dried up considerably. Apart from the early-May euphoria over BRC-2o, Bitcoin miners’ revenues have stayed muted for the majority of the ongoing crypto winter.