Bitcoin Mining Difficulty Reaches All-Time High

The fact that both Bitcoin (BTC) prices and mining difficulty have soared in the past several months indicates that confidence in the digital currency is growing — particularly when you consider that Bitcoin mining has been largely unprofitable throughout much of this time.  High mining difficulty is largely considered to be an indicator of an upcoming or current bullish trend in the price action of BTC against US dollars. 

 

Bitcoin Mining and Block-Reward Halving

One potential cause of the current increase in mining difficulty may be due to the upcoming Bitcoin halving event projected for mid-2020. After this, mining rewards will reduce to just half of the current rate — meaning Bitcoin miners don’t have too much time left to earn 12.5 BTC per block.  The next increase in difficulty is expected in just under two weeks and, by current estimates, the Bitcoin difficulty is due for an almost 10 percent increase after retargeting. With the network hash rate currently hovering between 50 and 60 exahashes per second, Bitcoin is more secure than ever before — further bolstering its stability as a store of value.  However, should the hash rate continue to grow without significant growth in BTC’s value, miners will need to begin investing more in their mining hardware to maintain profitability — since mining difficulty is usually negatively correlated with mining profitability.

Bitcoin Daily Transactions

Apart from the high difficulty, Bitcoin is also approaching record-breaking daily transaction volumes — placing the network under load. This load adds both additional pressures to those involved with Bitcoin mining and further incentivizes their activity as competition for block space gradually bumps up the average transaction fee.  As it stands, the average Bitcoin transaction fee is up by more than 75 percent in the last two months, with the next block fee currently sitting at over $4.20 — compared to the well under $1 seen prior to April. Additionally, the number of BTC outputs per day recently reached its all-time high of 1,067,904 outputs per day — although it is currently hovering at closer to 900,000 outputs per day. This indicates that more Bitcoin is moving around than ever before and is a demonstrator of the improved throughput of the blockchain.  So long as transaction fees stay manageable and both transaction volume and mining difficulty remain high, these changes can be considered demonstrators of health for the network and may be indicators of further growth for Bitcoin. What is your opinion on the current health of the network and Bitcoin mining? Let us know your thoughts in the comments!