Bitcoin Mining Difficulty Hits All Time High After Largest Outflow from Exchanges Since May 2024
Bitcoin mining on Wednesday, September 11, 2024, hit a new all-time high in its mining difficulty. Reaching 92.62 T, a 3.58% increase from the last updated change date.
The bitcoin network’s total computational power determines the mining difficulty. An increased computational power could translate to increased mining activities which increases the mining difficulty level.
The mining difficulty however adjusts at regular intervals when 2016 blocks have been mined. The network’s difficulty algorithm uses the 10 mins duration in mining last block in order to target a block creation time of 10 mins for the next blocks.
This indicator increase, brings forward the date of the next bitcoin halving. The last halving too place on the 20th of April.
Summary of Bitcoin’s All Time High ATH Mining Difficulty
- Bitcoin BTC mining difficulty updated ATH on September 11.
- The figure rose by 3.58% to reach 92.67 T.
- The average hashrate held steady at 616.13 EH/s.
$750 Bitcoin Outflow Hits Exchanges
Cryptocurrency exchanges on the 10th of September witnessed about $750 million bitcoin withdrawal. The outflow marked the largest exchange withdrawal since May this year.
An IntoTheBlock ITB senior researcher Juan Pellicer explained that “Regulatory concerns can prompt withdrawals as users seek to avoid potential restrictions.”
Going further to explain that with the level of BTC outflow involved, institutional players are most likely involved. “Institutional accumulation typically involves large-scale transfers from exchanges. The trend of self-custody is contributing to these outflows, as holders move their BTC to secure, offline storage options.” Adding that “Retail investors rarely move such large amounts in total. However, some portion probably comes from retail,”
Data from investing.com provides an insight to Pellicer’s explanations. Exchanges had their largest BTC outflow May. The BTC monthly historical chart shows BTC dropping by 7.07% in May. While it increased by 2.98% the following month in June.
The chart shows how significant change in investor behavior could lead to fluctuation in BTC price action.
While the bias for institutional participation in the cryptocurrency market, especially in the context of significant bitcoin outflows, tends towards a long-term bullish trend, it is important to note that the BTC price after three months, still threads below the last May outflow. The trading volume also strays below May’s figure.
Correlation Between Exchange’s BTC Outflow and BTC Mining?
Mining difficulty can often reduce profits due to the increase in mining costs required to keep operations going. While sellouts to offset cost may be a possibility, head of research at Presto, Peter Chung, argues otherwise.
According to Chung, “There is no clear cause-and-effect relation between mining difficulty and BTC price. Higher mining difficulty will indeed cause stress on the miners’ but how they react to such stress is up to individual miners,”
“Over the long-run, miners deal with rising difficulty levels by upgrading the equipment and/or pursuing other cost rationalization measures (e.g. seeking cheaper electricity cost, etc). Historically, when you average it out, BTC price showed no meaningful correlation with this particular variable.”
Head of insight at SOFA backs this claim, stating, “Revenue has been under pressure for many mining firms post-halving, we believe, however, that the recent selling pressure is primarily from trading stop-outs and ETF outflows.”
While the current sellout pressure in exchanges seems to coincide with the increase in bump faced by miners, analysts argue that existing data offers no correlation in mining difficulty and sellout pressure. Suggesting macroeconomic pressure as reason for the outflow, with the correlating timeline to the current BTC mining difficulty considered coincidental based on available historical data.
