Bitcoin is facing immense volatility with its unstable hash rate and mining difficulty
The year 2021 witnessed exponential growth and maturity in the crypto market. It not only demonstrated a break-out year for crypto assets in terms of returns but also indicated the growing infrastructure of the crypto industry and coins. It is pretty common knowledge that Bitcoin was the primary driver of this growth that also dictated the value and growing functionality of several other significant cryptocurrencies in the world. But the fall of the BTC token, in late 2021 brought down the entire market and significant digital assets along with it. Even though Bitcoin seemed to recover back in the first week of April 2022 as it almost crossed the US$47,000 resistance and was inching towards the US$48,000. But BTC fell again due to its extreme volatility, and this time, it was much worse! Its price fell below US$30k wiping out most of the investors’ wealth. Amid this price volatility, BTC also experienced an all-time record high hash rate volatility, which indicated an increased number of miners in the network, enhancing Bitcoin mining difficulty.
The Bitcoin network hash rate grew more than 400% since the Chinese crypto mining ban in 2021 when it fell below 70 EH/s. Back then, the Bitcoin network managed to recover from the significant hash rate drop by the end of 2021 and has only grown in 2022. But the BTC network witnessed an increase in mining difficulty to historic levels in April 2022. This mining difficulty managed to keep the block generation time, constantly for 10 mins. This phenomenon signifies more miners competing in the block, but its declining network value eventually led them to move to more profitable mining networks like Ethereum. Bitcoin network stood the test of time but these incidences seem like a slaughter for BTC’s market dominance.
The Bitcoin Mining Difficulty that Followed the Hash Rate Volatility
According to miners, it has never been more difficult to mine Bitcoin than it is now. Within a very short period of time, Bitcoin’s mining difficulty rose by nearly 6%. Greater network difficulty requires more computational power to successfully mine a BTC block that prevents malicious practitioners from affecting the network and manipulating the transactions.
Amid the present volatile market conditions, this Bitcoin hash rate volatility has exponentially increased its chances of suffering. The current value of Bitcoin, at the time of writing this article, is lurking around US$29,000 and US$30,000, which seems quite positive for investors since it is currently not diving anymore. But experts say that if it falls more than this then Bitcoin might experience the ‘Death Cross’ pattern, which will be even more harmful to the market and the investors.
Bottom Line
If Bitcoin happens to fall below US$28k, we might find the stable value to be near US$20,000. However, analysts believe that the BTC price is likely to increase from here. It might take some time for the crypto to reach its previous ATH, but once the market witnesses a slight uptrend in its value, it will probably successfully establish its foothold and might retain it for a long period of time. But the volatility still remains, hence, investors have to tread very carefully.
