Main Points:
- Bitcoin mining difficulty has reached a record high of 95.67 terahashes (T), with a corresponding rise in the hash rate to over 700 exahashes per second (EH/s).
- The difficulty increased by 3.9%, marking the 13th positive adjustment of 2024, leading to a 27% rise in difficulty overall.
- Higher mining difficulty often results in greater pressure on smaller miners, pushing them out of the market.
- Major miners are consolidating, with public mining companies holding a record 30% of the market share.
- Miner revenues have exceeded their 365-day moving average, signaling the potential start of a Bitcoin bull market.
Bitcoin is showing signs of a potential bull market as its mining difficulty reaches an all-time high, coupled with increasing miner revenues. As of October 2024, Bitcoin’s mining difficulty surged to a record-breaking 95.67 terahashes (T), driven by a historic hash rate exceeding 700 exahashes per second (EH/s). This development suggests that Bitcoin’s network is becoming more secure, but also more competitive for miners. These factors often foreshadow bullish price movements, as miner profitability starts to rebound.
Record-High Mining Difficulty
Bitcoin’s mining difficulty is a measure of how challenging it is to mine a new block on the network. As of October 22, 2024, this difficulty increased by 3.9%, marking the 13th positive adjustment of the year. Since the beginning of 2024, mining difficulty has risen by 27%, jumping from 72T to 95.67T. This adjustment coincides with a sharp increase in the network’s hash rate, which surpassed 700 EH/s, an unprecedented level of computational power dedicated to securing the Bitcoin blockchain.
Historically, such increases in mining difficulty align with the onset of Bitcoin bull markets. When difficulty rises, inefficient miners are forced to either upgrade their hardware or exit the market, leaving only the most efficient operations to continue.
The Hash Rate Surge and Its Implications
The hash rate, which represents the total computational power used to mine and process Bitcoin transactions, surged to over 700 EH/s, another record for the network. This increase reflects the massive investment in mining infrastructure worldwide. The higher the hash rate, the more secure the network becomes, as it makes it harder for malicious actors to attack the blockchain. However, for miners, this increase also means stiffer competition and higher operational costs, as more computational power is required to mine the same amount of Bitcoin.
Larger, more established mining operations are better equipped to handle these increases in cost. Meanwhile, smaller miners may struggle to remain profitable, leading to consolidation in the mining industry. According to Glassnode data, public miners now control around 30% of the Bitcoin mining market, a record high.
The Impact on Smaller Miners
Smaller miners have been feeling the pressure, especially since Bitcoin’s last halving event in April 2024, which reduced the block reward from 6.25 to 3.125 BTC. For many smaller operations, the halving, combined with rising difficulty, has made it difficult to turn a profit. As a result, some of these miners have either sold their holdings or shut down operations altogether.
Between November 2023 and July 2024, over 30,000 BTC were withdrawn from miner wallets, as many smaller players exited the network. This was the longest period of miner outflows on record. However, since July 2024, miner balances have stabilized, indicating that the remaining miners are better equipped to weather these market conditions.
Consolidation of the Mining Industry
The mining industry has seen increasing consolidation, with large publicly traded mining companies capturing a larger share of the network. These major players are better positioned to invest in the latest, more efficient mining hardware, which is crucial for profitability as mining difficulty continues to rise. This consolidation means that the Bitcoin network is becoming more centralized in terms of mining power, a trend that some industry observers find concerning.
Nonetheless, the remaining miners have managed to accumulate Bitcoin, as shown by relatively stable miner balances since July. This consolidation could further strengthen the network, as larger miners are more likely to have the resources to continue operations even in the face of rising costs.
Miner Revenues Rebound
One of the most promising signs for a potential Bitcoin bull market is the recovery in miner revenues. According to Glassnode data, the 7-day moving average of dollar-denominated miner revenues has climbed to $35 million, up from a low of $25 million in September. This 40% increase in revenue has coincided with a broader recovery in Bitcoin’s price.
More importantly, miner revenues have now exceeded their 365-day simple moving average (SMA), which historically aligns with the start of Bitcoin bull markets. As miner profitability increases, it reduces the likelihood of miners needing to sell their holdings to cover operational costs, which can reduce selling pressure on the market.
Future Outlook: Bull Market on the Horizon?
The combination of rising mining difficulty, increasing hash rate, and recovering miner revenues suggests that Bitcoin may be on the cusp of another bull market. Historically, Bitcoin bull markets have coincided with periods when miner revenues exceed their long-term moving averages, as they are currently doing.
However, challenges remain. The increasing concentration of mining power among large, publicly traded companies could lead to concerns about centralization. Additionally, smaller miners may continue to face difficulties as operational costs rise, potentially leading to further consolidation in the industry.
Bitcoin’s mining landscape is undergoing significant changes, with rising difficulty and hash rate pushing smaller miners out of the market and consolidating power among larger players. Despite these challenges, miner revenues are recovering, and historical trends suggest that a Bitcoin bull market may be imminent. As the network becomes more secure and miner profitability increases, the cryptocurrency market could be poised for significant gains in the near future.
