These are very interesting times for Bitcoin and all other cryptocurrencies on the market. When looking beyond the wild and somewhat entertaining price swings, it seems another statistic is worth paying attention to. The Bitcoin mining difficulty has reached a new all-time high following a major 12% increase. An intriguing turn of events which can have several different consequences.
MAJOR BITCOIN MINING DIFFICULTY INCREASE BECAUSE…?
For those who are unfamiliar with how Bitcoin mining really works, the overall hashrate determines whether or not the mining difficulty will rise or drop every two weeks. With fewer miners and a lower hashrate, the difficulty will tend to drop. Such a big drop occurred in late 2018, as the Bitcoin mining difficulty decreased by 8%, 16%, and 9.56% in three consecutive changes. A bit of an unusual development, but it is to be expected at times.
Given how the most recent difficulty adjustment yielded an 11.26% increase, one would assume the overall hashrate is on the rise again. Given the current Bitcoin price trend, that would not be entirely abnormal. It all comes down to which value per BTC miners would need to break even or generate a small profit from their operation. That value seems to fluctuate a bit and is very different for individual miners compared to actual mining farms. Even so, it seems to confirm Bitcoin is in a rather good place, all things considered.
MEMPOOL SIZE REMAIN HIGH
Albeit most of the unconfirmed Bitcoin transactions appear to get confirmed in rather quick succession, there are still a lot of peaks to contend with. Overnight, the number of unconfirmed TX spiked to over 25 million for a little while, after dropping down to more normal levels again. Even now, the mempool size is rising again, further confirming the current Bitcoin mining difficulty may have an impact on this trend.
Just because the mining difficulty and hashrate seem to be rising, that doesn’t mean users will have their transactions confirmed faster. In fact, this may very well have the opposite effect, when everything is said and done. As a lot of BTC is seemingly moved to and from exchanges due to the current price swings, there is slightly more network traffic for users to get through. An interesting statistic to keep an eye on over the weekend.
WHERE IS THE HASHRATE COMING FROM?
If the Bitcoin mining difficulty increases, it is usually due to a notable increase in overall hashrate. That is certainly the case, as the overall hashrate has increased in the past week and a half. However, it has certainly not reached any new highs to take note of, even though that could very well happen if this trend continues. Compared to October and November of 2018, the current hashrate appears to be near those levels once again.
Whether or not this is an indication a new Bitcoin mining ASIC has been deployed, remains to be determined. The only notable change is how ViaBTC’s hashrate seems to have increased by 50% in the past few days, albeit other pools have lost some hashrate to explain that discrepancy. BitFury also seems to be getting slightly more hashes in right now, whereas Antpool has notably moved backward. For the time being, it is anyone’s guess as to what is going on. Things may become clearer in a few days from today, when the statistics paint a much clearer picture.
TRANSACTION FEES REMAIN VERY HIGH
No one will deny the higher Bitcoin TX fees are not something to look forward to. In fact, there is a notable increase in transaction costs since early March of 2019. Despite a rather recent dip between May 19 and May 26, it seems the uptrend has remained in place. That is not necessarily something to look forward to, albeit there isn’t too much one can do about this trend at this time either.
The bigger question is how the current Bitcoin mining difficulty will affect the transaction fees moving forward. From a short-term perspective, it seems likely to assume not too much will change. Current mining difficulty projections indicate there may be another major difficulty increase in two weeks from now. As such, Bitcoin might find itself in a bit of a pickle again. In most cases, those issues are resolved rather quickly.