Mining difficulty increases, Bitcoin supply decreases… positive for price rise
Small-scale mining companies stop mining due to high maintenance costs, triggering a decline in Bitcoin supply
Bitcoin mining difficulty has broken its previous record. The difficulty of mining, which affects the supply of Bitcoin, is expected to change, which is expected to be a positive factor for future price increases.
According to Clover Pool (formerly BTC.com) on the 25th, the Bitcoin mining difficulty was adjusted to 95.7 trillion won. This is a new highest figure, surpassing the previous high of 92.7 trillion won. According to CoinGecko, a virtual asset market platform, on the same day, Bitcoin is trading at $67,000, up 5.7% from a month ago.
When the virtual asset market is in a bad situation, an increase in mining difficulty is interpreted as bad news. This is because the price of Bitcoin has fallen relative to the cost of mining, making it difficult to guarantee profitability. Additionally, small-scale mining companies put their Bitcoins on the market to resolve worsening profits. This becomes a factor that worsens the market situation.
When the price of Bitcoin is on the rise, an increase in mining difficulty can be interpreted as good news. This is because the cost of producing Bitcoin increases due to the increase in mining difficulty, so there is no reason for miners to sell Bitcoin. In November 2021, when Bitcoin reached an all-time high, the MPI fell to -0.5. MPI increases as the amount of Bitcoin sold by miners increases.
According to CryptoQuant on this day, the Miner Position Index (MPI) is recording -1.0. This year, the MPI has never exceeded 2.
As the difficulty of Bitcoin mining increases, there is a greater possibility that mining by small-scale mining companies will be halted. This is because as mining difficulty increases, it becomes difficult to pay maintenance costs such as electricity bills.
According to CoinDesk, a media outlet specializing in virtual assets, “As Bitcoin mining difficulty reaches a new high, small-scale Bitcoin miners are being pushed out of the market, so potential selling pressure is expected to ease.” As small mining companies are pushed out of the mining competition, the supply of Bitcoin is expected to decrease.
CryptoQuant CEO Joo Ki-young said on his “It dominates,” he said.
He continued, “As entry barriers increase due to increased institutional participation, Bitcoin volatility is decreasing, making it less attractive as an investment asset. However, until the halving in 2028, Bitcoin’s potential as a low-volatility currency will further increase.”
