Bitcoin Miners Brace For 5% Difficulty Spike To Fresh Record

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Data shows the Bitcoin Difficulty is set to see a jump of around 5% in the coming network adjustment, making miners’ job tougher than ever before.

Bitcoin Difficulty Is Estimated To See A Notable Spike In Next Adjustment

According to data from CoinWarz, the Bitcoin Difficulty is heading toward its fifth consecutive increase. The Difficulty refers to a metric built into the BTC blockchain that controls how hard it is for miners to find the task of mining on the network.

The feature exists for one purpose: to limit how fast miners perform their duty. This may sound strange at first since miners being able to process transactions faster should be a positive from a BTC-as-a-mode-of-payment perspective, but the cryptocurrency’s creator Satoshi made the feature with another goal in consideration: inflation.

When miners add the next batch of transactions to the blockchain, they receive the block subsidy in return as compensation for their work. The block subsidy happens to be the only way to produce more of the asset. Thus, if miners are freely able to add blocks and receive this reward, they would flood the market with coins.

Supply-demand dynamics guide that this would tank the cryptocurrency’s value. Thus, to prevent inflation running out of hand, Satoshi programmed the Difficulty. Whenever miners become faster than the network intends (by raising their computing power), the Difficulty automatically goes up just enough to slow the validators down to the standard rate.

The target block time for the Bitcoin network is 10 minutes. As the data below shows, miners have been going through blocks at an average time faster than this recently.

The details related to the upcoming Difficulty adjustment | Source: CoinWarz

Bitcoin miners have been taking an average of 9.52 minutes per block recently, which is significantly faster than needed. As such, the blockchain is estimated to respond with a rather large Difficulty increase of about 5.1%.

The BTC network adjusts its Difficulty about every two weeks, with the next such event estimated to occur around 4:25 AM UTC, Friday. Once the increase goes through, the Difficulty will spike to a new all-time high (ATH) of around 136.29 terahashes.

Miners will face this pressure after already dealing with record-high Difficulty levels for the last few weeks.

How the BTC Difficulty has fluctuated over the last six months | Source: CoinWarz

As is visible in the above chart, the Bitcoin Difficulty has seen four-straight positive adjustments recently, with three of the raises resulting in fresh ATHs. Despite this, miners have only expanded their total computing power to a new record, as data from Blockchain.com shows.

Looks like the 7-day average value of the metric set a record just a few days ago | Source: Blockchain.com

It now remains to be seen whether miners will continue to expand even after the upcoming Difficulty spike or if they will roll back in the coming days.

BTC Price

Bitcoin recovered above $112,000 on Wednesday, but it appears the coin has seen a retrace since then as its price is now back at $110,700.

The trend in the BTC price over the last five days | Source: BTCUSDT on TradingView

Featured image from Dall-E, Blockchain.com, CoinWarz.com, chart from TradingView.com

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