News JVTech Mining Bitcoin has never been more complicated as its price drops. Here is the reason
Posted on 11/25/2022 at 4:20 p.m.
Since its peak at more than €50,000 reached in November 2021, Bitcoin has continued to slide down along with traditional stock market indices. Currently, around €15,700, the first cryptocurrency has never been so complicated to mine.
Bitcoin Price Falls, Crypto Mining Difficulty Rises
In recent times, bitcoin mining enthusiasts and professionals are facing significant turbulence. In addition to the fall in its price, necessarily bringing in less profit, miners are seeing an increase in the difficulty of mining a BTC. Indeed, it has never been so hard to get a Bitcoin reward using your graphics card or ASICs.
The reason comes from an increase in the difficulty metric. This rose by 0.51% after the bitcoin network reached block 764,064, taking the difficulty to 36.95 billion. This update is done automatically and the next one will be on December 4th. The evolution of the difficulty is transcribed in the Hashrate, designating all the computing power necessary to create a register a new block on Bitcoin – and thus pocket its rewards in BTC. This hash rate has reached a record in recent days, weakening the efficiency of the network.
The timing of the difficulty increase coupled with the price drop is of course very bad news for Bitcoin miners.
A discouraging context for Bitcoin miners
Apart from the technical aspect, crypto miners are plagued by a context that is not very favorable to the development of the sector. As a reminder, the collapse of the FTX exchange platform had a clearly visible impact on the price of cryptocurrencies.
While the price of a bitcoin is around €15,700, its production cost is higher. Currently, without counting the hardware, it takes approximately €18,800 to collect the remuneration following a contribution to the validation of a block on the Bitcoin network. This figure varies every day depending on several data such as the cost of electricity among others.
With the difficulty increasing and the price dropping, Bitcoin miners are currently under pressure and cannot necessarily repay their fees. They are not ready to dump their Bitcoin since it would lose around €3,000 on each BTC. By way of comparison, when Bitcoin was over €50,000, it sold for almost 3 times more than its production cost. Thus, in the middle of crypto winter, some prefer to unplug their machines rather than mine.
In addition, there is the recurring pressure from several governments that miners have been facing for several months. The context of energy neutrality pushes them to stop the mining activity of BTC, regardless of the profitability.