“It’s going to be epic”: Is adjusting Bitcoin difficulty really pushing the price further this week?
“It's going to be epic”: Is adjusting Bitcoin difficulty really pushing the price further this week?
This week there will be an adjustment to the Bitcoin difficulty that will affect miners and could affect prices. The asset has just closed its first large green weekly candle in three months, so there may also be a turnaround in the game.
Bitcoin difficulty increases
The difficulty in the Bitcoin network is a measure of how difficult it is to find a hash below a specific target. Valid blocks must have a hash below the global block difficulty target. There is also a share difficulty that applies to mining pools and their ability to find a hash that is lower than the global target.
The mining difficulty automatically adjusts to every 2,016 blocks in the network, depending on the number of miners and the total time it takes to find the next 2,016 blocks. The hash rates also affect the difficulty – and they have been at an all-time high lately, which is why an increase is necessary.
“It’s going to be epic,” comments PlanB, inventor of the Bitcoin stock-to-flow model, about the upcoming difficulty adjustment.
Tuesday's difficulty adjustment will be epic! pic.twitter.com/NZQ0xBppDd
— PlanB (@100trillionUSD) January 12, 2020
According to bitinfocharts.com, the level of difficulty of the Bitcoin network is currently 13.8 T, the highest level ever reached. On Tuesday, this value will be increased by 8% to 15 T, which will make the validation of new blocks even more difficult. This is remarkable because it is a comprehensive adjustment – compared to the 1-2% that are normally changed.
The hash rate, which effectively represents the computing power of the Bitcoin network, has also reached an all-time high of 117 EH/s. This clears up any notion that the miners could surrender in advance of the halving in May.
CM estimates have Bitcoin's Difficulty increasing by ~8% in 4 days time to reach a new ATH at ~15,000,000,000,000
This is due to the implied hash rate of Bitcoin maintaining ATH levels since Jan 1 pic.twitter.com/MfLOKTJNiK
— CoinMetrics.io (@coinmetrics) January 10, 2020
Crypto Twitter has rumors of a hash war between Western and Chinese miners. It is said to have kept the rate high this year. Chinese mining pools that the ecosystem already dominate, may have kept bitcoin hash rates high to supplant their western rivals, who pay more for electricity.
The increased difficulty combined with higher hash rates make it more expensive to mine with the current hardware gains. This should intensify if the block reward is halved in four months.
Bitcoin: short-term price outlook
At the time of writing, Bitcoin has exceeded the psychological limit of $ 8,000 and closed its most bullish weekly candle since late October. At that time, China’s blockchain praises made prices skyrocket.
For most of the weekend, Bitcoin has consolidated at around $ 8,100, where it is currently traded. So far this year the asset has increased by 12.5%, the long-term technical indicators are slowly turning up again.
The increase in difficulty and the high hash rate are a sign of the strength of the network, although not directly linked to prices. If the miners decide to halve the HODLn, the next few months could certainly be for Bitcoin very bullish.