Recently, Bitcoin mining difficulty hit a historic high, linked to changes in network computational power, but this status is expected to be temporary.
Mining Difficulty Reaches All-Time High
This week, Bitcoin mining difficulty has soared to a record 127.6 trillion. However, according to CoinWarz, the next difficulty adjustment scheduled for August 9 is anticipated to bring this figure down by approximately 3%, to around 123.7 trillion.
Currently, the average block time stands at 10 minutes and 20 seconds, slightly above the ideal 10-minute mark.
Role of Stock-to-Flow in Bitcoin Scarcity
Mining difficulty is closely tied to Bitcoin’s hashrate—the total computing power used to validate transactions and secure the network. This dynamic plays a critical role in preserving Bitcoin’s scarcity through its stock-to-flow (S2F) ratio.
The S2F model compares the existing supply of an asset to its rate of new production. A higher S2F ratio generally indicates stronger price stability and resistance to inflation through oversupply.
Bitcoin’s S2F ratio is currently higher than that of gold. With about 94% of its maximum 21 million coin supply already mined, Bitcoin is becoming increasingly scarce.
Difficulty Adjustments Keep Market Stable
The mechanism of difficulty adjustment ensures that Bitcoin’s issuance remains steady regardless of sudden surges or declines in mining power. If more miners join the network, the difficulty rises to maintain the 10-minute block interval. Conversely, if miners exit due to lower profitability, the difficulty drops to stabilize block creation.
This self-regulating system guards against overproduction, which could otherwise flood the market with new BTC and trigger downward price pressure.
Bitcoin mining difficulty continues to fluctuate, and the upcoming adjustment is expected as part of the protocol's built-in resilience, aiding in the preservation of Bitcoin's long-term value.
