1. Breaking! Mining difficulty 'plummets', what happened?
In the past few days, a piece of data has gone viral in the crypto circle: Bitcoin mining difficulty has been reduced by 11.16%!
Many newcomers may be confused: isn't a decrease in difficulty a good thing? Mining has become easier, isn't that a positive?
Don't rush to conclusions. Let's first explain what 'mining difficulty' is in simple terms.
You can imagine the Bitcoin network as a 'fully automated money printing machine'. Satoshi Nakamoto set a strict rule when writing the code: an average of one block (gold) is produced every 10 minutes.
If there are more miners, and the computing power is too strong, the block generation speed increases (for example, to 8 minutes per block), the system will raise the difficulty, making it harder to mine, forcibly pulling it back to 10 minutes.
Conversely, if miners collectively shut down and retreat, block generation slows, the system will lower the difficulty, easing conditions for the remaining miners.
This drastic drop in difficulty of 11.16% means that a large number of mining machines have gone on 'strike' in the past two weeks. This level of decline has not been seen since the major clean-up in 2021, indicating that miners are really close to giving up.
Two, in-depth analysis: Why are miners collectively 'pulling the plug'?
Why are the most steadfast 'believers' in the crypto world shutting down? There are three bloody cases/reasons:
Price falls below the 'shutdown price' (profit line firmly held):
Currently, the BTC price has halved from last year's peak, while miners' electricity costs and machine depreciation remain unchanged. It is estimated that many miners' mining costs (total costs) are around $90,000. When the coin price falls below this cost, every second they run their machines results in losses, forcing them to helplessly 'pull the plug'.
The 'backstab' of extreme weather in the United States:
Recently, the United States has encountered severe winter storms (such as the Fern storm), and mining farms in Texas and other areas were forced to undergo large-scale power outages to ensure electricity for residents. This caused a dramatic drop of 60% in the hash rate of the world's largest mining pool, Foundry. It's not that they don't want to mine; it's that they have no electricity.
AI is taking business:
This is a very heart-wrenching professional perspective. Current mining farm owners find that renting out their high-performance servers and electricity to AI companies yields much higher returns than mining Bitcoin! Many large mining companies have already begun to 'switch from darkness to light' and transform into AI data centers.
Three, the key! What impact does the decrease in difficulty have on us newcomers?
Many fans are asking: With the decrease in difficulty, is the coin price going to crash?
In fact, historical patterns tell us: this is actually a signal for the market to build a bottom.
Washing effect: The decrease in difficulty is essentially the 'weak retreating'. Those small miners with poor financial conditions are washed out, leaving behind those with deep pockets and 'old money'.
Selling pressure decreases: Miners are one of the largest short sellers in the market (because they need to sell coins to pay for electricity). When unprofitable miners shut down, they have no coins to sell, which actually reduces potential selling pressure in the market.
Security alert: Of course, a decrease in hash rate means a slight reduction in network security. Although Bitcoin's defenses remain unbreakable, this shaking of confidence often leads to short-term price fluctuations.
Four, current operational advice: Stay steady, don't panic!
Since this is an essay for Binance Square, not providing some practical advice would be irresponsible. Regarding the current situation, I have three suggestions:
Do not blindly bottom-fish: A decrease in difficulty often lags behind a drop in coin price. Miners haven't fully washed out, and the market may still have one last 'panic sell-off.'
Pay attention to the 'Hash Ribbons' indicator: This is commonly used by professional investors. When the difficulty starts to rise again and hash rate recovers, it's usually an excellent long-term buying point.
Building a position in batches is better than going all in: Currently in a 'winter rest period', rather than gambling on a short-term surge, it’s better to use Binance's regular investment function to gradually accumulate chips.
In conclusion:
The greatness of Bitcoin lies in its self-regulation mechanism. No matter how bad the market is, its commitment to generating one block every 10 minutes has never changed. A decrease in difficulty is not an apocalypse; it is the system detoxifying itself.
If you can understand this logic while others are panicking and shutting down, you are one step closer to financial freedom.
This content only represents personal opinions and does not constitute investment advice. The risks of cryptocurrency investment are extremely high, so please exercise caution.
