Today saw the second most pronounced decline of all time in the difficulty of Bitcoin mining. It went from 16.55 T to 13.91 T, a decrease of almost 16%. It was since mid-January 2020 that the difficulty had not been so low.
This is the second most pronounced drop ever, after that of October 2011, but in front of the one in December 2018, which was the result of another price drop.
However, it is still at a higher level compared to what it was until 2019, only below the peaks at the beginning of 2020, and is attributable to a significant drop in hashrate.
In fact, after the all-time high at the beginning of March, the hashrate fell back to the levels at the end of 2019. Certainly, this recent reduction is a direct consequence of the price collapse of BTC, considering that the lower the market price of bitcoin is, the less it is worth to mine it.
Furthermore, around mid-May, the halving will take place, i.e. a reduction of the reward for bitcoin miners, so it is possible that some miners who had probably already decided to stop mining, perhaps temporarily, have already suspended activities because of the price drop.
The difficulty variation keeps the average time needed to mine a block more or less around 10 minutes, which means that when the hashrate decreases, it is inevitable that the difficulty will also decrease.
This decrease is the direct and inevitable consequence of the hashrate decrease, which in turn is caused by the fall in BTC’s price and perhaps also by the imminent halving of the miners’ reward.
Now, with a reduced difficulty, it will be easier for miners who are still mining to be able to validate blocks by receiving the 12.5 BTC reward for each extracted block, which means that mining will remain profitable even if the value of bitcoin drops.
Naturally, this also means that some will stop mining. The more miners stop extracting BTC, the more the hashrate is reduced, the more the difficulty decreases, and the less expensive it becomes to mine for those who continue to do so.
The system is therefore in dynamic equilibrium, to the extent that the variation in the hashrate and the difficulty do not affect the performance of the network, if not in the very short term.