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Bitcoin mining difficulty surges 31% since July

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As the Bitcoin (BTC) network hashrate continues recovering amid global miners accumulating more capacity, the cryptocurrency is getting increasingly difficult to mine.

On Sept. 21, the Bitcoin network posted another mining difficulty adjustment, rising 3.2% to hit a difficulty rate of nearly 19 trillion, according to data from blockchain explorer BTC.com.

The latest adjustment makes up the fifth consecutive surge of Bitcoin’s mining difficulty since mid-July, with the difficulty rate increasing more than 31% from around 13.7 trillion, the lowest difficulty level since June 2020.

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The new positive adjustments follow a batch of four consecutive difficulty drops that started with a nearly 16% decline in late May amid global ESG-related concerns over Bitcoin as well as China’s nationwide crackdown on cryptocurrency mining.

Despite seeing five positive adjustments in a row, the current Bitcoin mining difficulty rate is still far from the all-time high level of over 25 trillion recorded in May 2021.

Bitcoin’s 10 past mining difficulty adjustments. Source: BTC.com

Bitcoin mining difficulty is a metric designed to reflect how hard it is to mine a Bitcoin block, with a higher difficulty level requiring more computing power to verify transactions and mine new coins. The difficulty adjustment occurs every 2,016 blocks, or about every two weeks, as Bitcoin is programmed to self-adjust in order to keep a target block time of 10 minutes.

The ongoing growth of BTC mining difficulty comes in parallel with a significant surge of the Bitcoin hashrate, the total combined computational power used to mine and process BTC transactions. The Bitcoin hashrate surged to 150 exahashes (EH/s) in late August after plummeting to as low as 52 EH/s in June, recovering to early June levels and indicating that miners were coming back online after China’s crackdown.

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Foundry USA becomes second-largest Bitcoin mining pool amid China ban

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New York-based crypto-mining service provider Foundry USA takes the lead to become the world’s second-largest Bitcoin (BTC) mining pool after taking up a 15.42% share of the network.

Data from BTC.com shows that Digital Currency Group-owned Foundry USA stands behind the pool leader AntPool by a hash rate of just 4,000 PH/s, which contributed to a 17.76% network share at the time of writing.

The rise in the participation of American entities can be attributed to China’s recent blanket ban on crypto trading and mining activities. The ban forced a large-scale migration of local Bitcoin miners, who now reside in crypto-friendly jurisdictions including the United States, Russia, and Kazakhstan.

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Out of the top five mining pools in terms of hash rate distribution, Foundry USA charges the highest average transaction fees of 0.09418116 BTC (nearly $5,500) per block. American businesses have also picked up China’s slack in terms of crypto ATM distribution.

Coin ATM Radar data shows that Georgia-based Bitcoin Depot has overtaken its Chinese counterparts to become the world’s biggest crypto ATM operator. Interestingly enough, a majority of the crypto ATM operators are run by American companies, a trend more prominent after China’s proactive ban on crypto activities.

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Despite the clear intent to pursue an in-house central bank digital currency (CBDC), the Chinese Communist Party has also sought public opinion on the Bitcoin mining ban on Oct. 21, which has sparked conversations around the amendment of the government’s negative stance on Bitcoin and cryptocurrency mining activities.

However, Statista’s data confirms that China’s contribution to the Bitcoin mining hash rate has been on a steady decline since September 2019. Two decades ago, China represented over 75% of Bitcoin’s mining hash rate, which by April 2021 reduced to 46% prior to banning cryptocurrencies.

As the United States inches towards Bitcoin’s mainstream adoption, the regulators seek clarity in relation to the new reporting requirements put forth by the Biden administration.

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Members of the Republic and Democratic party have appealed, in different occasions, to amend the crypto tax reporting reforms along with a plea to redefine the word “broker” in crypto transactions.

Starting from 2024, the bipartisan infrastructure bill requires the general public to declare digital asset transactions worth more than $10,000 to the Internal Revenue Service. The bill currently considers miners and validators, hardware and software developers and protocol developers as brokers.

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China Crypto Ban: Authorities to Hike Power Prices for companies disobeying Crypto Mining Ban

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mid the ongoing crypto ban in China, the authorities are isolating specific categories of companies to clamp down on any crypto operations taking place in the nation, and this time around the Chinese regulators have targeted their own, state-owned entities. The government has warned the enterprises to quit cryptocurrency mining and could potentially impose a hike in electricity prices on companies that continue to disobey the Chinese Crypto Ban.

NDRC “Unsustainable” argument against Crypto Mining

Meng Wei, a spokeswoman for the nation’s chief economic planner, the National Development and Reform Commission (NDRC) confirmed that the commission will soon begin working towards the closure of industrial-scale Bitcoin mining activities along with cracking-down state companies that have participated in the same. Meng Wei emphasized crypto mining’s unsustainable nature, noting that it “consumes lots of energy” and “produces lots of carbon emissions.” The authorities have levied crypto mining as an “extremely harmful” practice, which threatens to jeopardize China’s Carbon Neutral ambitions.

Additionally, last week, the NDRC called for a special meeting to discuss the issues of crypto ban defiance by provinces and municipalities, and further investigate and shut down State-owned enterprises indulged in crypto mining. Given China’s anti-crypto stance, it was unsurprising when the officials accused crypto mining and trade of deliberately creating “prominent risks,” and called the industry “blind and disorderly.”

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Chinese Crypto Mining Ban History

Despite the hard-hitting ban on crypto businesses in China, the country continues to see Bitcoin trades nearing record highs. Last month, the Beijing authorities issued new guidelines regarding the country’s crypto ban, including the highly intrusive tracking of the IP address of citizens to check whether or not they were mining crypto. Followed by that, the authorities in Zhejiang province also reportedly began investigating government employees and their illegal use of public places to mine cryptocurrencies.

The government then issued an official warning, noting that virtual currencies consume an eminent amount of energy. However, despite the crypto ban the energy consumption did not reduce, which further led to the launch of a joint rectification program.

“In order to thoroughly implement the national work deployment on rectification of virtual currency mining and trading hype issues, orderly promote carbon peaking and carbon neutralization, and prevent and resolve risks in key areas, our province has recently launched a joint special rectification action to comprehensively combat the use of public Resources participate in virtual currency mining and trading activities.”

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Bitcoin Miners See High Prices as ‘Opportunity,’ Become Sellers

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Bitcoin (BTC) miners have once again turned into net sellers of bitcoin, with miner inventories dropping to levels not seen since early September. However, miners aren’t necessarily turning bearish “en masse,” although some are looking to offload “excess inventory,” according to an analyst.

According to the bitcoin data and research platform ByteTree, about 30% more BTC was sold than mined on Thursday, as more Bitcoin miners sent part of their holdings to the market.

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The fresh round of selling from miners was also visible in data that tracks miner inventories. As of Friday at 13:03 UTC, miners’ inventories fell to their lowest level since September 11 this year, with BTC 1,521,397 currently held by miners.

The current number represents a drop from a peak of BTC 1,523,766 reached on November 8, when the bitcoin price stood at around USD 45,000. 

Worth noting, however, is that about BTC 1.5m were mined during the early days of bitcoin, and have never entered the market.

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Bitcoin miners’ inventory, last 12 weeks:

Source: Terminal.bytetree.com

Commenting on the findings, Charlie Morris, Founder of ByteTree and Chief Investment Officer of ByteTree Asset Management, told Cryptonews.com that the selling now comes after a period of accumulation for miners.

“The miners have been accumulating BTC since early September which has served them well,” Morris said. He added that “some have decided to take profits,” while noting that this is “not huge, but tells us sentiment is shifting.”

“Miners sell BTC every day as they have costs to pay and want to bank profits. Prices are high and so they see an opportunity,” Morris said.

And given that the bitcoin price earlier this week just barely managed to reach a new all-time high, Morris said that the selling could also be related to some miners who had bet on a higher price spike now finding themselves on the wrong side of that bet.

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“Perhaps they assumed the recent [all-time high] would see a price spike. It hasn’t happened and so they are selling more than they recently have,” the ByteTree founder said. “They aren’t turning bearish en masse, just at the margin. Recall they have been building excess inventory,” Morris noted, adding that the selling could potentially tell us something about what to expect next:

“Historically they have been good market timers.”

At 13:03 UTC, BTC traded at USD 64,082, down 1.8% for the past 24 hours and up 4% for the week.

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