Since hitting the bottom of $3,000 in 2018, Bitcoin mining difficulty has continued to adjust downward

Bitcoin ’s fundamentals now look like they are at the bottom of the 2018 bear market, with a repeat of the mining network move that has only occurred twice in history. An analysis of Bitcoin’s network difficulty after the latest adjustment on June 4 shows that current market conditions bear similarities to the period when Bitcoin was trading near the low $3,000s.

The third largest difficulty adjustment in Bitcoin history

This week, the difficulty was adjusted down by 9.3%. Two weeks before that, it dropped by -6%. If the next adjustment is also negative (currently predicted to be -7%), this would be the third time in a row that there have been three difficulty adjustments downwards.

The only other time in history that there have been consecutive downward difficulty adjustments, aside from December 2018, is when there have been eight consecutive downward adjustments since 2011.

The recurrence of mining difficulty is likely to be significant. Difficulty provides an expectation of miners’ interest in participating in the market, and reducing it will incentivize miners to participate in the verification of transactions on the Bitcoin network.

Difficulty adjustments are also key to ensuring Bitcoin’s status as hard money. Difficulty changes occur automatically every 2,016 blocks and allow Bitcoin to adjust predictably without compromising security.

Bitcoin mining difficulty chart showing the decline in difficulty in 2018. Source: BTC.com

Bitcoin is still “working as it was designed to do”

In 2020, the situation became complicated just weeks after Bitcoin’s third block subsidy halving event, which cut miner revenue by 50%. As Cointelegraph reported, mining pools have continued to sell off since then, with miners selling more Bitcoin than they earned from mining.

However, for most people, the current behavior is no different than business as usual for Bitcoin.

“There is no miner death spiral, even though we lost almost 50% of the hashrate, the network is rebounding and the next difficulty adjustment is about 10% lower. Bitcoin is still working like it was designed to.”

Lower difficulty will further increase the network’s hash rate as miners increase participation. Computing power (hash rate) has already begun to climb after the halving, and a common theory suggests that Bitcoin price action will follow the rise in hash rate.

Three months after the December 2018 low, Bitcoin began a mini-bull run, peaking at nearly $14,000. Last year, a study suggested that Bitcoin should reach a peak price level of 1,000% of its 2018 low one to two years after the third halving.