A key measure of competition among Bitcoin miners has just dropped by 15,95%, the second largest percentage loss in the history of the network. The decline in the so-called mining difficulty indicates that some miners have retired from the race since a drop in the quotation of the cryptocurrency has made this business less profitable.
What are the effects of the drop in Bitcoin prices on miners
Two weeks ago, bitcoin suffered the worst sale in seven years, and has only partially recovered since then. Mining requires powerful and specialized computers that consume large quantities of electricity and these companies typically pay those bills by selling their bitcoins.
The drop in prices has wiped out most of Bitcoin's computing power gains in the past three months. This situation has mainly affected mining operators who worked with older equipment such as Bitmain's AntMiner S9 and other equivalent models.
From now on, this decline may work in favor of those who have chosen to stay in the game as less competition means that individual miners would get a bigger cut in daily Bitcoin production.
The third largest drop in percentage value of Bitcoin's mining difficulty was 15,13%, recorded in December 2018 during a price slump. The largest percentage reduction in difficulty in Bitcoin history dates back to October 2011.
Bitcoin mining difficulty is scheduled to update spontaneously every 2.016 blocks - which normally take around 14 days - in order to keep the average block production interval at around 10 minutes.
A really bad timing
What has aggravated the situation for mining operators in the past 17 days is that mining difficulties peaked on March 9th - a few days before the March 12 price drop - and more than two weeks before the next update.
The total average computing power generated by all mining equipment on the bitcoin network in the past two weeks has declined from 118 exhahash per second (EH / s) in early March to around 99 EH / s.
And this led to an increase in the average block production interval to almost 12 minutes, subsequently extending the adaptation period to 17 days, which means that the reigning mining operators had to wait three days longer than usual before they could to extract bitcoins, while continuing to pay electricity costs.
Currently, with the significant reduction in mining difficulty in the current cycle and the price of bitcoin that has returned to over $ 6.600, old mining equipment such as Bitmain's AntMiner S9 are able to bring back modest daily profits again, according to PoolIn data.
Meanwhile, the latest and most powerful mining computers provided by Bitmain, MicroBT and Canaan since late 2019 continue to generate profits as they boast greater mining efficiency.