Bitcoin Mining Difficulty Nears 10% Revision Amid Profitability Decline

Key Insights:

• Bitcoin mining difficulty just got the second-largest downward revision YTD.
• Miner profitability was a key reason for the revision, but AI has been growing into a greater threat.
• Analysts explain why the SOPR ratio may signal when the bottom is near.

Bitcoin mining difficulty has been revised for the second time this year. This comes just as the market has been struggling with bearish conditions and shrinking profitability. That has been forcing some miners to shut down operations.

Bitcoin mining difficulty adjustments are essential for balancing out the system. The latest difficulty adjustment occurred this weekend, dropping from 138.9T on Friday to 128.9T at the time of observation.

Bitcoin mining difficulty adjusted this weekend | Source: Coinwarz

The last time that the Bitcoin mining difficulty was adjusted downward was in February this year. This latest adjustment has pushed even lower, currently at a new YTD low. The last time the difficulty level was this low was in July last year.

This latest 9.5% adjustment was a reaction to recent changes. But the key thing here is what it means for the network.

Sharp Decline in Miner Profitability Warranted the Bitcoin Mining Difficulty Adjustment

The Bitcoin hash rate peaked at 1.245 ZH/S in the last week of May. However, it cooled to as low as 720 EH/S at the start of June, and the latest data showed that it hovered at 781 EH/S.

Bitcoin hash rate | Source: Coinwarz

The Bitcoin hash rate chart confirms that BTC crypto price decline this month negatively impacted profitability. Some miners were likely forced to shut down their operations after failing to break even at lower BTC prices than their operating costs.

This is why difficulty adjustments are important. Miner exit leads to slower block times because greater difficulty delays transactions.  This means the difficulty adjustment serves as a form of network balancing.

Lower Bitcoin prices were not the only reason miners have been withdrawing from mining pools. Some miners, especially companies that previously operated in the Bitcoin mining segment, recently shifted their attention towards AI.

Data center demand for computing power is among the key reasons why some miners have been exiting crypto.

Is Bitcoin Crypto Price Bottom Close?

While mining difficulty does not necessarily influence price, it may be seen as a symptom of current market conditions. The big concern now is that Bitcoin crypto may continue on its downward trajectory.

On the other hand, some analysts believe that it could rally from recent lows. This division of ideas and expectations suggests that the market remains uncertain of the next move.

Analysts and traders have been exploring whether the latest crash will act as a robust support level. The current consensus around the matter is that Bitcoin price is near its current cycle bottom.

That idea may be supported by key metrics. For example, a recent CryptoQuant analysis suggests that BTC is near its bear market bottom based on its SOPR ratio. According to the analysis, the Bitcoin SOPR ratio will likely retest the bear market bottom when it touches the 0.55 level on the SMA60.

Bitcoin SOPR ratio as a bear market bottom indicator | Source: CryptoQuant

The ratio hovered at 0.9 at the time of observation. This means it still has some room to cool further before reaching the aforementioned 0.55 level.

Bitcoin crypto price action has so far kicked off the week on a bullish leg. The price is pushing above $65,600. The recovery has been characterized by weak spot inflows, suggesting it could be limited unless market forces suddenly shift in favor.

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