BTC is about to face the biggest difficulty reduction in 12 years. What does this mean?

According to data from multiple blockchain analysis websites around the world, Bitcoin is about to experience its largest difficulty reduction in history.

Since the beginning of June, Bitcoin’s overall hashrate has dropped by 41%! Data from websites such as BTC.com and Glassnode show that the difficulty of BTC mining will be adjusted in four days (around July 3). This adjustment is likely to bring the largest drop in difficulty since the birth of BTC twelve years ago, with an estimated drop of nearly 25%.

Throughout the history of BTC development, its computing power growth trajectory has been almost "advancing and rising" throughout its life cycle. Although troughs occasionally occur (such as the fourth quarter of 2018), this is rare.

However, 2021 is destined to be a special year. Compared with the past few years, the continued decline in computing power has seriously deviated from the previous growth trend. MiningPoolStats data shows that Bitcoin's total network computing power fluctuated between 80-90 EH/s last week, far lower than 150 EH/s at the beginning of the year.

Since the market peaked in April, the price of Bitcoin has fallen sharply. Bitcoin's hash rate has followed closely behind, but its decline has been relatively gradual. Historically, BTC hash rate has almost always moved with price changes.

But there are some exceptions to the current situation. The decline in Bitcoin prices and computing power is directly caused by my country's supervision and the crazy shutdown of mining centers such as Sichuan. The continuous drop in prices will reduce the profit margin of mining itself, and will also lead to shutdowns and further declines in the computing power of the entire network.

At the current price and difficulty level, BTC mining is easier than in the first half of this year, which means that miners can make more profit from mining Bitcoin, and the profit will be more substantial after the difficulty is reduced. Therefore, the reduction in difficulty will stimulate more machines to go online, thereby stretching the computing power again and even affecting the price.

Due to the new regulatory policy, the computing power of many top mining pools in the world has also declined, especially those in China. Sichuan fell, and the United States was full. The computing power of Foundry, a US mining pool under DCG, the world's largest crypto asset company, has recently increased significantly.

When will the price and hashrate start to rebound is an open question. How to judge the market direction in a bearish environment? Remember: FUD affects price, and price affects hashrate.

With the huge computing power and difficulty reduction, coupled with the global computing power reshuffle under the big stick of regulation, Bitcoin is entering a golden age of mining. There is no doubt that Bitcoin will become a more powerful and decentralized blockchain network. Of course, all this may have little to do with Chinese miners.

Willy Woo, a well-known on-chain quantitative analyst, said sarcastically: "This month we should cheer for China because it selflessly helped Bitcoin remove the last centralized part of the network, and it and future generations will bear the cost."