Bitcoin price was trading slightly higher this past week, though still lower by around 50% compared to its peak around mid-April. Price mostly fluctuated between $32k to $37k levels, designating that the volatility has cooled down.
Furthermore, last week’s price movement was also an indication that the largest Bitcoin mining difficulty adjustment in history did not directly impact the price of Bitcoin. The adjustment, which took place on July 3, caused the Bitcoin mining difficulty to settle down by more than 27%.
The reason behind this historic plunge in Bitcoin mining difficulty was China’s vigorous crackdown on crypto mining operations. Needless to say, China has been the world’s crypto hub since one can remember. It was estimated that China accounted for around 65% of the Bitcoin hashrate.
However, as a consequence of the crackdown, approximately 90% of China’s mining operations went offline. The cumulative impact on the Bitcoin hashrate was around 50%, meaning that the Bitcoin hashrate plunged to half of what it was during May.
Nevertheless, when the number of miners drops, the mining profitability increases so that more miners are incentivized to turn to Bitcoin mining.
Mining Profitability to Increase by 2x
A recent report by the leading blockchain analyzer Glassnode reveals that the current miners have just witnessed an evaluated 38% to 49% decline in competition — at least, in the short term.
The daily Bitcoin issuance remains the same, while competitors are halved. This implies that the miners who have remained operational will be witnessing their mining profitability increase by 2x. At present, miners are estimated to cumulatively earn between $25 million to $30 million per day.
Some traders have taken Twitter to notify how the mining difficulty adjustment has affected their revenue. The majority say their profitability has jumped by around 50%.
Moreover, miners have been very reluctant to sell their Bitcoin at the current price levels. Even during the alleged “Great Migration” and China’s consecutive bans, miners have not shown a substantial increase in their spending behavior.
The Glassnode report states:
“… miners have begun accumulating in a way the market has not seen to date.”
As miners increase pressure on the Bitcoin circulating supply by not selling their coins, it would be safe to expect that Bitcoin will successfully defend the current support levels. On the other hand, a sell-off by miners can drastically exacerbate the current slump.