Bitcoin mining difficulty reaches record high ahead of halving
Bitcoin’s mining difficulty reached a historic high of 86.4 trillion as the highly anticipated halving event approaches in April, according to data from btc.com. This surge in difficulty is a result of companies generating significant computing power in preparation for the upcoming code change. Mining difficulty refers to the computational power required to solve complex mathematical equations and unlock new Bitcoins. Since the last halving in 2020, mining difficulty has increased by about 600%, and it has been steadily rising since May 2021.
BTC miners are currently investing more computing power than ever before, aiming to accumulate more cryptocurrency and strengthen their cash reserves before the block rewards are reduced. Block rewards are the primary source of income for miners, and with the upcoming halving, the reward will be reduced to 3.15 BTC, resulting in a decrease in daily Bitcoin issuance from 900 to 450.
Historically, Bitcoin experiences a decline of 15% to 40% before a halving event, followed by a significant increase in value in the long term. However, Bakhrom Saydulloev, the product lead at Mercuryo, suggests that there may be a short to mid-term retracement triggered by miners liquidating their BTC holdings. Saydulloev also notes that the current uncertain regulatory environment surrounding cryptocurrencies may impact the outcome of this halving event, unlike previous halvings that occurred during more favorable economic and investment climates. On the other hand, the presence of spot Bitcoin ETFs could incentivize cash flow into the cryptocurrency, with these ETFs already accumulating over $200 billion in trading volume in less than four months.
As the halving event approaches, it remains to be seen how the market will react and whether Bitcoin will follow its historical patterns or experience a different trajectory.
