Bitcoin mining difficulty expected to see largest drop since China ban

According to an analysis performed by CryptoSlate using Glassnode data, the difficulty of Bitcoin (BTC) mining will be adjusted downward by about 4.5% in the next adjustment window around 7 pm on July 21st. Expected.

The event shows that mining will be the least difficult after China cracked down on Proof-of-Work (PoW) mining in May 2021. research It was suggested that 75% of the hash rate of the network is from China.

The graph below shows the past four cases of significant downward revisions. These occurred in March 2020, May 2020, October 2020, and July 2021, with the July adjustment being the biggest drop.

Difficulty of Bitcoin mining on price charts

Bitcoin mining and hash ribbon indicator

The Hash ribbon indicator Identify the pain of Bitcoin miners. This means that the mining cost of BTC is too high compared to its price. High distress indicates the surrender of miners and in some cases may indicate the bottom of the market.

The graph below shows the 60-day and 30-day hash rate moving averages (MA) and BTC prices. When the 30-day moving average exceeds the 60-day moving average, the ribbon turns dark red, suggesting a possible surrender (miner gives up) and bottom, indicating a bullish scenario.

Bitcoin hash ribbon

Similarly, when the 60-day moving average exceeds the 30-day moving average, the ribbon turns bright red, creating a bearish scenario.

The current miner’s surrender stage has continued for the past 42 days. During the 2018 bear cycle, the surrender lasted 72 days, and after the surrender was over, BTC recorded a 300% profit and peaked at $ 12,000.

Since July 2021, following China’s ban, hash rates have formed a rounded top pattern. This suggests that weak miners are still in captivity, leaving strong miners to mine in a less competitive environment.

Average hash rate

Average hash rate It refers to the average estimated number of hashes per second resulting from the efforts of miners. Often this is a measure of security and is considered an approximation of the number of miners supporting the network.

Bitcoin’s hash rate peaked in May, leading to a decisive downtrend. When used in combination with hash ribbon data, this supports the theory that weak miners exist, leaving the most efficient miners to support the network.

Bitcoin hash rate

Minor net change position

Changes in the net position of Bitcoin miners refer to the rate of change in unused supply. Positive flow indicates that the miner holds more tokens than it sells – accumulation.

Currently, miners are in a modest distribution stage, and miners are selling their holdings, mainly due to various factors such as market conditions, operating pressure, energy costs, and unprofitable old mining equipment. Suggests. However, the magnitude of the change in the current net negative position is small compared to past cases where this happened.

Minor net change position

Closing comments

In a recent tweet, Jason Williams, the author of Bitcoin: Hard money you can’t F * ck posted about the nine stages of mining that ended up with rising BTC prices.

On-chain metrics show that the market is currently in stage 4-mining difficulty is diminishing. In the coming weeks, on-chain data may show an increase in hash rates and the difficulty of returning upwards.

The miner’s surrender is still underway, but the amount of BTC transferred from the miner to the exchange suggests that the miner’s pain is chilling.

Miner to exchange flow

An important factor to consider is the end of the surrender phase, but it involves macroeconomic factors, including the outcome of the July 27 FOMC meeting.

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