Bitcoin mining difficulty drops by 12.6%, now is the time to mine

After Xinjiang conducted a comprehensive power outage safety inspection in April this year, the hash rate of the entire network dropped by about a quarter within half a month. Then on May 2, the difficulty of Bitcoin mining dropped by 12.6%, which was the largest drop in Bitcoin mining difficulty this year, correcting the decline in the hash rate of the Bitcoin network.

Currently, some of these miners are back online, and Bitcoin's hash rate has gradually recovered to around 170EH/s, but more miners need to come back online before the network can reach the operating level it was a few weeks ago.

In fact, the plunge in computing power will theoretically lead to a significant increase in revenue for mining farms and mining machine owners that are not affected. This is because the computing power of the mining pool is like a big cake. With fewer people sharing the cake, the single T revenue of the mining machine will naturally increase. According to BTC.com data, after the difficulty decreases, the block revenue has been rising, reaching a maximum of 8.47158432 BTC, and is currently stable at around 6.50007373 BTC.

“The 12.6% difficulty drop is the largest negative difficulty adjustment since 2012, excluding November 2020 (end of hydro season), March 2020 (Black Thursday), and December 2020 (end of hydro season), which means this is a great time to be a miner,” Compass Mining CEO Thomas Heller told CoinDesk. “The hash rate drop was primarily caused by inspections and related power outages in Xinjiang province, and while most mining farms in the region have restarted mining, the network hash rate has not yet reached all-time highs.”

Rising overseas computing power will help decentralization

The fact that the Xinjiang mining farm issue has such a large impact on hash rate also shows that the majority of the network's computing power still comes from China. Seasonality and government changes in China have the potential to affect computing power levels and have a profound impact on network difficulty and mining economics.

In recent years, China has taken a leading position in the mining field, accounting for about 65% of the total network computing power. However, since the fourth quarter of last year, a large amount of overseas institutional funds have flowed into Bitcoin, and with the supply crunch coming, mining has suddenly become more attractive to Western institutions.

The increase in overseas mining capacity, represented by the United States, will further decentralize and benefit the entire cryptocurrency market. Bitcoin's decentralization has long been questioned because mining is mainly concentrated in a few large mining pools in China. Distributing mining to other countries and more interested people will help improve the security of the entire network.

Mining will add new liquidity channels for US traders and provide direct access to market-making services, ensuring better liquidity for the entire cryptocurrency market to meet growing institutional demand. Therefore, mining can also bring competitive advantages to liquidity providers.

As demand continues to rise, a new solution is needed that can meet market demand. In addition, if the previous generation of miners intend to hold on as prices rise, this will create new incentives for institutions to enter the mining field and ensure that liquidity continues to flow.

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