Forex Analysis & Reviews: 21.01.2022 - BTC down but mining activity...

21.01.2022 03:43 PM

BTC down but mining activity rises. Bitcoin mining difficulty hits all-time highs

Bitcoin failed to hold above $40,000 today and crashed to a six-month low. However, on-chain analysis shows encouraging data on the Bitcoin network.

Bitcoin mining difficulty reaches all-time highs

According to Glassnode and BTC.com, Bitcoin mining difficulty recorded its biggest increase on Friday. It has exceeded 26 trillion for the first time.

The mining difficulty measures how hard and time-consuming it is to find the right hash for each block. It is arguably the most important fundamental component of the Bitcoin network.

This metric is automatically adjusted to the changes in mining efforts depending on how many miners participate in the process. The higher the competition, the higher the difficulty. This ensures the stability of mining regardless of such factors as sentiment, price, or unexpected events.

After falling in mid-2021, mining difficulty recovered towards the end of the year. After that, the last automatic correction added 9.32% to the previous level. As a result, it has climbed above $26 trillion for the first time on record.

Commenting on this event, cryptocurrency journalist and commentator Colin Wu noted that the increase is the highest in more than half a year. BTC.com data confirms that the last correction of more than 10% occurred at the end of August.

Miners stay active despite falling prices

As we can see, a decline in BTC value does not affect the determination of miners. The mining difficulty of Bitcoin has naturally followed the growth of the hash rate, which has consistently set new records in the past year.

According to MiningPoolStats, the hash rate, an estimate of the computing power allocated to blockchain miners, currently stands at 192 exahashes per second (EC/s), having briefly reached 218 EH/s on January 10.

As often reported by Cointelegraph, the old adage of "price follows hash rate" is still popular among BTC holders who do not sell Bitcoin under any circumstances. However, this trend is gradually fading away as fundamental indicators are moving in the opposite direction of the spot price.

Thus, the growing hash rate means that miners are optimistic about the profitability of their operations in the long-term perspective. Calculations from last week showed that miners' break-even point currently stands at around $34,000.

Bitcoin price prediction

After breaking through the support zone of $40,000 - $42,000, the number one cryptocurrency reached the next downward target of $37,903.51. In this situation, two outcomes are possible. The first one is a recovery towards $40,000 in case current support proves to be strong. In the second scenario, a breakout of $37,903.51 and consolidation below it will open the way for BTC/USD to the next support level of $35,915.72.