In recent weeks, the Bitcoin mining network has shown a significant decline in hashrate, which could lead to a drop in mining difficulty. This adjustment could happen for the first time in nearly four years and has wide-reaching implications for the industry.
Decline in Hashrate and Difficulty
According to data from Mempool.space, the total computational power securing the Bitcoin network has dropped by nearly 30% over the past two weeks. The network's hashrate now stands just below 700 exahashes per second (EH/s), compared to a recent high of around 1,000 EH/s. It is expected that mining difficulty could decrease by 9% within the next five days, which would be the steepest change since July 2021.
Profitability Pressures on Miners
Data from CryptoQuant shows that Bitcoin miners are currently 'extremely underpaid.' The analysis indicates that profitability has significantly diminished as specialized equipment that consumes substantial power is now required. Miners were adequately compensated when Bitcoin traded in the $90,000–$105,000 range, but since June, their profitability has nearly evaporated.
Geopolitical Factors Impacting the Industry
On June 22, the United States launched targeted airstrikes against Iranian nuclear facilities, which reportedly impacted electrical infrastructures associated with mining operations. Iran legalized Bitcoin mining in 2019, contributing about 4.5% to the global hashrate, but this figure has now declined to about 3.1%. Following the strikes, reports of blackouts in both Iran and neighboring Israel emerged, potentially disrupting mining activities.
The current conditions in the Bitcoin mining industry, driven by declining hashrate and difficulty along with geopolitical factors, have created a challenging environment for miners. It is crucial to monitor developments in this rapidly evolving landscape and their potential ramifications.
