Bitcoin miners close up shop as mining difficulty hits 5–month low
- Bitcoin mining difficulty falls to 5-month low as mining hash rate drops
- Miners forced to close up shop with Bitcoin price drop and rising energy costs
- Electricity costs have jumped off geopolitical tensions, with the European Power Benchmark rising 281% in Q1
Bitcoin’s hash rate is the amount of computing power being contributed to the network by miners. By solving complex mathematical puzzles, advanced computers around the world help maintain the digital currency’s network. It is this process that allows Bitcoin to be self-sufficient and run without a centralised party overseeing it
The higher the hash rate, the greater the security of the network and resistance to attack. It is therefore a key metric, and can be used as a gauge to assess the health of Bitcoin.
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Mining hash rate falls to 5-month low
Mining hash rate has fallen since the May/June crash that has decimated the market. After climbing steadily from the last major crash in May 2021, the meltdown that followed the contagion arising from the Terra collapse in May has reversed the trend abruptly, with hash rate dropping in line with the price of Bitcoin.
Zooming in on the 2022 timeframe, we see the fall-off in hash rate since May below.
As a result, Bitcoin mining difficulty has fallen to the level last seen in March, meaning a 5-month low.
Rising cost of electricity is squeezing miners
With the geopolitical climate driving headlines as a result of the surge in gas prices, electricity has also been on the up. Focusing just on Europe, the European Power Benchmark averaged 201 €/MWh in the first quarter of 2022 – that is a rise of 281% compared to the same quarter in 2021.
Certain countries were even worse. Spain and Portugal jumped 411%, while prices in France rose 336% and Italian prices were the highest across the EU at €249 per MWh, a 318% rise from a year earlier.
It is this combination of rising operational costs and falling price in Bitcoin that is hurting miners, causing many to close up shop and dropping the hash rate and mining difficulty of the network.