“Difficulty” in Bitcoin mining refers to the level of difficulty that miners must solve to find the hash that validates blocks.
Bitcoin mining difficulty level sets new record
This level varies continuously, approximately once every two weeks, in order to adapt to changes in the hashrate and always keep the average time needed to find the individual hashes and validate the individual blocks more or less around 10 minutes.
Yesterday there was the last automatic adjustment of the difficulty, which reached its new all-time high: 31.25 T.
The previous level was 29.79 T, so significantly lower. The sharp upward adjustment was necessary because of the recent new highs in the hashrate.
This is because when there’s an increase in the computing power allocated worldwide for Bitcoin mining, called “hashrate” in jargon, there is a risk that the average time needed to mine blocks is also significantly reduced. In fact, the so-called block-time had dropped to 9.5 minutes in the last few days, even with a monthly minimum peak of 8.6 minutes on 1 May.
The raising of the difficulty was therefore necessary, and was absolutely expected, so much so that both the miners and the markets were prepared for such an event.
It is worth mentioning that after the record-breaking hashrate of 2 May, its level dropped a bit, also due to the fact that the drop in Bitcoin’s price caused a significant drop in the value of BTC received by miners at each block.
Moreover, as the difficulty increases, the electricity required to mine the hashes also increases, so the profitability of mining becomes even less convenient.
The difficulty adapts to the hashrate level
According to data from bitinfocharts.com, it has plummeted to $0.134/day per THash/s, which is a level not seen since December 2020, before the start of the last big bull run. Back then, Bitcoin’s price was well below $20,000, but the difficulty was below 20T.
At this point, it is possible to imagine that the next adjustment, scheduled for the end of May, may lead to a reduction in the difficulty, because it is possible that in the coming days the hashrate will fall.
These dynamics, strictly technical-operational, do not affect market prices, rather they are influenced by them.
The lower the price of BTC the more it reduces the profitability of mining, since the miners are paid in BTC. When this happens, miners reduce energy consumption by turning off some machines, reducing the hashrate.
Instead, when the price of BTC rises, the profitability of mining grows, so either new miners arrive, or those already active buy new machines or simply machines that were previously turned off are turned on. All this increases the hashrate.
Source: https://en.cryptonomist.ch/2022/05/11/bitcoin-mining-time-record-difficulty/