- Bitcoin mining difficulty increased by 3.22% to 49.55 trillion, hitting a record high.
- The increase in on-chain activity over the past few weeks has resulted in a rise in the number of miners on the network.
- Rise in hashrate signals strength in Bitcoin’s network security as it lowers chances of an attack.
The Bitcoin network ushered in a mining difficulty adjustment, increasing it by 3.22%. Typically, an increase in mining difficulty of a Proof-of-Work (PoW) network is indicative of network health and resilience to attacks.
Also read: Solana captures new users as Bitcoin and Ethereum struggle
How a rise in BTC mining difficulty influences Bitcoin price
Bitcoin is a Proof-of-Work asset and its mining difficulty represents the security and resilience of the BTC network against attacks. The metric measures the difficulty of mining a block on the Bitcoin network and relies on the number of miners actively mining on BTC blockchain.
Mining difficulty can have an indirect influence on the asset’s price. When difficulty rises, the cost of mining a Bitcoin block increases and miners typically offset this rise by selling their rewards to cover higher operation costs.
Higher costs of operation can potentially be related to an increasing volume of BTC being sold by miners, representing a higher influx of supply. If there is demand across crypto exchanges to absorb the supply, BTC price is likely to remain unchanged, but a fluctuation in demand could result in selling pressure on the asset.
Rising on-chain activity has ushered in higher hashrate
Bitcoin network’s hashrate also increased following the 3.22% rise in mining difficulty at block height 790,272. The mining difficulty is at 49.55 trillion, breaking a record high for the PoW asset.
Bitcoin mining difficulty
The current average hashrate is 367.84 Exahash per second (EH/s). Colin Wu, a Chinese reporter and crypto analyst, attributes the rise in popularity of Ordinals and BRC-20 token standards to the growth in the number of miners on the network and the subsequent increase in the hashrate.
Bitcoin ushered in a mining difficulty adjustment at block height 790,272, and the mining difficulty increased by 3.22% to 49.55 T, breaking through a record high. The current average hasjrate is 354.55 EH/s. The recent popularity of Ordinals BRC20 has led to more mining…
— Wu Blockchain (@WuBlockchain) May 18, 2023
Impact on Bitcoin price
If there is a lack of retail participation or demand across cryptocurrency exchanges, the influx in supply from miners selling BTC to cover operation costs could increase the selling pressure on the asset.
The supply on exchanges metric on Santiment measures the volume of BTC held by cryptocurrency exchanges and can be used to track the selling pressure on the asset.
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Bitcoin supply on exchanges v. price
At press time, there is no significant shift in the supply on exchanges. However, this is the metric that traders need to watch to determine the direction of Bitcoin price volatility in the short term.
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