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The volatility of Bitcoin prices is expected when mining difficulties are adjusted to 10%

June 13, 2020

The difficulty of bitcoin mining is organized in such a way that, according to BTC.com, it increases by at least 10% within 3 days. This means that the cost of Bitcoin mining (BTC) will increase significantly in a short time.

This has been important since then The increased operating costs for miners could put them under pressure to sell more BTC to compensate for the increased expenses.

The Bitcoin network is divided into three groups: users, developers and miners. Users work with nodes to distribute information, miners use the power of computers to process data, and developers maintain the prosperity of the protocol.

The volatility of Bitcoin prices is expected when mining difficulties are adjusted to 10%The volatility of Bitcoin prices is expected when mining difficulties are adjusted to 10%

Halving is activated every four years for the mine block reward in the Bitcoin network, which halves the amount of BTC that can be mined. The last halving was on May 11, 2020 and before the halving. Miners generated 1,800 BTC a day. After halving, that number dropped to 900 BTC a day.

If halved, the miners’ costs will essentially double. Since you can only mine half of the BTC that you mined earlier, this means halving your overnight income.

Is there an impending hash rate?

If the block reward is reduced and the level of difficulty adjusted for mining, many small and above average miners will find it difficult to adjust to their sharp rise in operating costs. Consequently, A relatively large proportion of miners will disrupt mining.

Since there are fewer miners in operation, the difficulty of mining Bitcoin is automatically adjusted. This happened in late April when the number of active miners decreased immediately after halving.

Bitcoin mining difficulty increases by 10.19% in 3 days

Bitcoin mining difficulty increases by 10.19% in 3 days. Source: BTC.com

The adjustment to the mining difficulties that occurred about 40 days ago led to an increase in Bitcoin’s blockchain network hash ratebecause it made BTC mining cheaper than before.

Now that the difficulty of mining increases by more than 10%, The risk that miners would sell more BTC compared to what they mine could also increase. In this case, Bitcoin will continue to come under selling pressure for a short time.

ByteTree data shows this Miners mined approximately 7,356 BTC last week and spent 5,984 BTC. The miners rescued 1,372 BTC from what they had mined and had a positive net inventory.

Miners have saved more BTC in the past seven days as mining difficulties have remained minimal

Miners have saved more BTC in the past seven days, while mining difficulties have remained minor. Source: ByteTree

However, When difficulties arise, miners generate less BitcoinThis means that BTC’s net inventory could become negative again, as was the case during May.

Investors expect sales pressure to increase

On June 11, Bitcoin’s price dropped 9% within a few hours as the U.S. stock market saw the biggest correction since early March.

When the difficulty of mining increases and the price of Bitcoin dropsMiners will sell more BTC to cover their operating costs and The market could experience a sharper correction that would continue until the next difficulty adjustment.

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