One of the most efficient ways of telling if the crypto winter is coming to an end is by looking at the mining difficulty of Bitcoin. There is a link between the value of Bitcoin and its mining difficulty. Good news is that in the last 7 days, the difficulty of Bitcoin mining has increased by 13.07%!
So why do people mine Bitcoin?
When mining, one has to take into consideration the associated costs associated as well as the potential value of the specific coin. With regards to costs, one has to calculate how much electricity is required as well as the mining hardware and proper ventilation. It is near impossible to guess how much the price of a specific coin may increase. There are too many variables. Thus, it is advisable to look at historical charts in order to get a better idea of the coin’s potential.
The ultimate goal is to maximize your profits. A mistake many people who mine make is that they sell Bitcoin bit by bit. This is a mistake since you will make maximum profits if you hold on to your Bitcoin and wait until the next bull run to sell. If you can hold onto your Bitcoins until the next bull run, you may see your holdings increase three-fold. When used in that regard, mining Bitcoin can be extremely profitable.
How does mining affect the difficulty?
The difficulty of mining increases as more mining hardware is being deployed. It is interesting to note that the Bitcoin network automatically adjusts after every 2016 blocks. The update usually takes place every two weeks and means that it will take 10 minutes longer to mine a block.
There are stories of those who mined Bitcoin when it was still in its early stages whom recently may have turned their machines off due to incurring costs. What has changed? The difficulty of course. The anonymous Bitcoin software creator, Satoshi Nakamoto made sure that it was easy to mine Bitcoin until the masses joined the party thus increasing the difficulty. The more Bitcoin is mined, the more difficult it will become which will increase the price.
The Bitcoin market is at a constant clash. Should the difficulty of mining Bitcoin rise to such an extent that it is easier to simply buy Bitcoin, it will put pressure on the market. The opposite scenario also applies. Bitcoin’s value is linked to high difficulty and the mining difficulty is dependent on its price increase.
Is the crypto winter coming to an end?
According to the Bitmart Senior Trade Analyst, Rudner de Witt, this may very well be the case when looking at the mining difficulty of Bitcoin.
“Remember the difficulty of mining Bitcoin always influences the price.”
According to CoinWarz, a website that gives updates on the mining difficulty, as well as hashrate of mining various coins, the difficulty of mining Bitcoin, has increased by 13.07% over the last 7 days. Check out Bitcoin’s chart by clicking here.
It is interesting when comparing Bitcoin’s graph to that of Bitcoin Cash. The difficulty rate of mining Bitcoin Cash has actually decreased with 5.7% over the last 7 days. Check out the chart here.
These events also correlate with the end of the so-called trading winter. Read Bitmart’s blog “Cryptocurrency seasons of trading explained” for more on the high and low trading seasons.
In conclusion, nothing is guaranteed in this industry but if history is anything to go by, it looks as if summer is approaching.