Bitcoin Mining Difficulty Drops Rapidly and Its Worrying, Here’s Why

AnalysisBitcoin Mining Difficulty Drops Rapidly and Its Worrying, Here's...



Arman Shirinyan

Bitcoin mining difficulty once again giving mixed signals amid Bitcoin’s 10% correction

Contents

Bitcoin mining has always been a powerful indicator of demand for the first cryptocurrency and was sometimes used as one of the ways to determine market conditions. According to data from WuBlockchain, Bitcoin’s hashrate has today lost over 1%, which is considered a moderate loss.

How hashrate reflects market conditions

In addition to reflecting a demand for a cryptocurrency, hashrate can give traders and investors a hint about the conditions of the market, if it is in accumulation or in distribution. During the summer bullrun in 2021, the market saw the biggest drop in the hashrate in history after a Chinese crackdown on the digital assets industry, which has also affected mining.

The bullrun was mostly possibly due to the rapid drop of issuance of BTC, which later on caused a lack of selling pressure on the market. Later on, the market saw a massive 50% correction moments after the hashrate recovered to pre-crackdown levels.

How does hashrate affect the market today?

According to mining difficulty and hashrate charts, we see a constant increase in both metrics, which shows that demand for Bitcoin remains high despite the unpleasant market conditions.

But as Bitcoin is continuously losing its value and hashrate is rising, the market may in fact see an increase in selling pressure, which might push Bitcoin down further.

At press time, the first cryptocurrency is trading at $40,122 and has reached the trendline support, which acted as a bouncing platform since Feb. 22.



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