Bitcoin network difficulty hits record high, how long can miners hold out?

Author | Joyce

It is difficult for retail investors to make money.

On July 13, the difficulty of the Bitcoin network soared 9.8% from the beginning of the month to reach an all-time high of 17.35T. The difficulty is expected to increase to 19.04T in 13 days.

Bitcoin network difficulty changes, source: btc.com

Miners' survival is difficult

The last maximum difficulty of the Bitcoin network occurred three days before the market crisis on March 12. Since the Bitcoin halving, the network hash rate has dropped significantly, and the mining difficulty has subsequently been reduced twice. But on June 16, the network difficulty was adjusted upward by 14.95%, almost reversing the previous two declines. Although this time it was not as large as the increase last month, the difficulty was only 15.78T at the time.

Currently, there are about 16 mining pools in the entire network. Among them, F2pool accounts for 16.1% of the computing power of the entire network. In addition, Poolin, Btc.com, and Huobi account for 15%, 11.4%, and 10.8% of the computing power of the entire network respectively.

The network difficulty is a switch that adjusts the speed of Bitcoin blocks. When the difficulty increases, the most direct change is that the coins mined will be greatly reduced, which will affect the income of some miners to a certain extent.

According to Cointelegraph analysis, affected by the halving, miners' daily income dropped directly from 2,188 BTC to 852 BTC, a drop of 61%. Some miners were forced to leave. According to glassnode statistics, network transaction fees rose from $0.62 at the end of April to $5.21 on May 15, and some miners relied heavily on Bitcoin transaction fees to survive.

Monthly bitcoin mining revenue, broken down into block rewards and transaction fees. Source: CoinDesk Research, Coin Metrics

Miners withdraw coins "quickly"

It is reported that a mining farm with 160T computing power produces about 13 bitcoins a day, but consumes more than 100,000 kWh of electricity an hour. During a flood season, the electricity and gas expenses are tens of millions or even hundreds of millions.

Since the halving, the price of Bitcoin has briefly exceeded 10,000 USD, but has been hovering between 9,000 USD and 9,500 USD for most of the time, and miners have limited income. Data shows that Bitcoin miners earned 281.6 million USD in June, down 23% from the previous month, a 15-month low.

Some miners have to sell coins to pay various expenses. Mike Alfred, co-founder of market analysis firm Digital Assets Data, said at the beginning of the month that miners are a potential catalyst for recent Bitcoin price activity. He said that during the June 24 crash, miners sold more than 300% more BTC than they produced that day.

BTC.com CEO Jason Zhuang also said that a few years ago, large mining pools still kept a lot of coins that miners had not withdrawn. Some miners even used mining pools as wallets, keeping coins for half a year or even longer. But starting from 1 to 2 years ago, miners basically withdrew coins very quickly.

Blockstream CEO Adam Back believes that mining is more profitable than buying coins directly, and that you should invest money and keep the mined coins. "If you sell the coins as soon as you mine them or sell some of them to pay for electricity, you lose the hedging advantage."

Alex, founder of Rolling Stone Miner, said that POW mining will always support the operation of the public chain of digital tokens led by Bitcoin, and the threshold for retail investors to participate is getting higher and higher, including deposits and withdrawals, machine purchases, machine maintenance, and information collection thresholds. In the future, the possibility of a surge in mining power will become lower and lower, because of the existence of existing mining machines, long-term market education and extreme chip technology have been basically completed. Regarding the previously popular cloud computing power mining, he said that although the threshold is very low, it is currently difficult for retail investors to make money.

Conclusion

According to F2Pool statistics, there will be halvings every month in the second half of this year, for a total of about 8 currencies. Among them, XZC, ZEC, and ZEN will be halved in September, November, and December. How should miners proceed in this so-called "first year" of halving?