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Bitcoin’s mining difficulty, a measure of how hard it is to create a new block in the cryptocurrency’s blockchain, has reached a new peak of 114.7 trillion over the weekend, following a 5.6% increase.
According to CoinDesk, this new high comes at a time when the Hash Ribbon indicator suggests that bitcoin miners are facing capitulation, a scenario where the cost of mining exceeds the profits from it.
The Hash Ribbon is a market metric that is considered to indicate a local bottom for bitcoin prices, typically becoming apparent when miners are under financial stress. Data from analytics firm Glassnode indicates that this capitulation period began in early February, with bitcoin’s value declining over 4% since the start of the month. In the past, such capitulation signals have often been followed by a recovery in bitcoin prices.
Bitcoin’s price could potentially reach a bottom around $91,000 if the current pattern persists. The previous capitulation signal was in October 2024, which preceded a 50% increase in BTC’s price. The recent rise in mining difficulty is attributed to an all-time high in the bitcoin network’s hash rate, recorded on February 4. The mining difficulty adjusts every 2,016 blocks to maintain an average block time of 10 minutes.
Increased difficulty in mining implies a more competitive environment for miners, which can lead to financial strain. This has been reflected in the production data from January, where Riot Platforms (NASDAQ:RIOT), a major public mining company, was the only one to report an increase in production from the previous month.
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