Bitcoin mining: hashrate and difficulty at all-time highs

The levels of difficulty and hashrate in Bitcoin mining are reaching new historical records. For the first time in history, the difficulty has risen above 92T (trillions). The previous record was at the beginning of August, when it stopped at 90.66T.

Bitcoin mining: the updates of hashrate and difficulty

The difficulty of Bitcoin mining is a parameter that updates automatically and exactly always after 2,016 blocks. 

The latest update occurred yesterday at block number 860,832, and the next one is scheduled between September 25 and 27, at block number 862,848.

The reason why the difficulty varies is that the Bitcoin protocol always tries to ensure that a block is mined on average every 10 minutes.

When the hashrate of miners increases, the average time to mine a block also decreases, and so every 2,016 blocks the Bitcoin protocol automatically adjusts the difficulty to slow down the mining process and bring it back to around 10 minutes.

The record of the hashrate

The fact that the difficulty is at an all-time high means that the hashrate is as well.

In fact, taking the weekly average estimates as a reference, the historical peak was reached on Monday, September 9, when it surpassed 690 Eh/s for the first time in history. 

It should be noted that before the April halving, the peak was 650 Eh/s, and after the halving, there was a drop to 556 Eh/s in June. In short, the halving of the reward for miners did not halve the computing power they dedicate to mining. 

Although by the end of July the hashrate of Bitcoin had already reached a new all-time high, above 660 Eh/s, it was only from the end of August that it solidly rose above 650. 

Moreover, during the days of the halving, the price of Bitcoin was around $64,000, which is higher than the current one. In theory, as the price of BTC decreases, the value of the BTC received by miners also decreases, forcing them to cut costs by shutting down some machines and reducing the hashrate.

There is, however, another reason that is pushing the hashrate up, beyond the reduction of the value of BTC and especially the halving of the reward for the miners.

The increase in hashrate and difficulty in Bitcoin mining: what is happening?

The fact is that the hashrate can only increase very slowly, while for example the price of Bitcoin can also increase very quickly. 

The last time the hashrate had stopped growing, before the halving, was in July 2023. 

At the time, a Bitcoin was worth about $26,000, and since then it has practically more than doubled. 

At this point, one would have expected a doubling of the hashrate, which however has not yet occurred, given that at the end of August 2023 it was only slightly below 380 Eh/s. 

Therefore, the increase in hashrate generated by the increase in the price of Bitcoin produced by the last bullrun, which started in October 2023 and ended in March 2024, is still ongoing. 

Furthermore, in the meantime, the new machines for mining have become more efficient, meaning that with the same operating costs they are able to produce more hashrate, and this in turn further contributes to increasing the computing power overall engaged in Bitcoin mining. 

The difficulty follows the halving at about a couple of weeks’ distance, given that it takes approximately 14 days to mine 2,016 blocks. 

And so even with a slight reduction in the market value of BTC in recent months, and a halving of the BTC reward for miners, the hashrate has ultimately returned to all-time highs. 

The impact on the price

However, one should not think that the growth or decline of the mining hashrate has consequences on the price of Bitcoin. 

In reality, however, it is the exact opposite, because the hashrate that the miners commit to mining Bitcoin is the result of their completely arbitrary free decision, which is negatively influenced when the price drops, and positively when it rises. 

Only that deciding to reduce the hashrate is very easy, because it is enough to turn off some machines, starting with the less efficient ones. Instead, increasing it is much more difficult, because you need to buy new more efficient machines, generally very expensive, wait for them to be delivered, and then install, configure, and start them. 

This process cannot have effects on the price of BTC, also because it happens with weeks or months of delay. 

It is worth noting that from May to July 2022 the hashrate was reduced to 193 Eh/s, when the price of Bitcoin fell below $21,000, and since then while the price has increased by about 2.8 times, the hashrate in just over two years has increased by a good 3.5 times, despite the April halving. This clearly shows how the increase in the efficiency of the machines used for mining has a significant effect on the increase in hashrate in the long term.