Bitcoin Mining Difficulty Can Dictate a Bull Run?

Considering the leap of Bitcoin price in 2017, it went from just around $1,000 to near $20,000 in a matter of 12 months. But 2018 is a different story. With massive correction this year, it has now shrunk to just around $6,200 to $6,500. Aside from its price, the volatility is also something that is worth mentioning. Bitcoin is no longer as volatile as it used to before. Is this a sign that people are holding on to their Bitcoin nowadays waiting for the next bull run?

If you will ask experts, they have different opinions regarding the future of Bitcoin price. Tom Lee, for instance, believes that Bitcoin could still go as high as $25K this year. For Mike Novogratz, he believes that early next year will be the most likely time when institutional investors enter the picture.

But the reality is that there really is no 100% foolproof way of knowing the direction of Bitcoin price. However, there are those who believe that we should look at the mining difficulty when it comes to predicting the price of Bitcoin.

Over the years, Bitcoin mining process has become expensive. From spending on your powerful computers to air conditioning units to cool the mining hardware, these are just some things that you will have to consider as a miner.

Bitcoin Mining Difficulty To Dictate a Bull Run?

According to Kevin Lu and Thejas Naval who worked for Element Digital Asset Management, “Monitoring bitcoin difficulty growth is an important indicator of how close we are to the mining breakeven threshold and if we are going to experience a period where inefficient miners begin to leave the network”.

They mentioned that inefficient miners leaving the network is a sign that there could soon be another bull run. They further explained that this might not be happening any time soon. They even explained that it could happen in the next 6 to 12 months to have a flat or a negative difficulty before a bull run occurs.

It has been observed that there were only two times when the difficulty of Bitcoin mining decreased. In contrast to other bear markets, the difficulty went negative for more than two occasions.

Miners Losing

It has been said that miners are losing from their endeavor. In fact, there is now a trend that is no longer practical for basement miners to operate. Today, the majority of miners are now based in China as they have cold weather and cheap electricity. Based on the latest numbers, 70% of Bitcoin Network’s hash rate is from China.

In fact, there is even a claim that was made by Ripple CEO Brad Garlinghouse that “Bitcoin is really controlled by China”. He mentioned that “I’ll tell you another story that is underreported, but worth paying attention to. Bitcoin is really controlled by China. There are four miners in China that control over 50 percent of Bitcoin. How do we know China won’t intervene? How many countries want to use a Chinese-controlled currency? It’s just not going to happen”.

But is Bitcoin already bottoming? Could this mean that another bull run is coming our way? Looking at the involvement of institutional investors from Bakkt to Fidelity, and the regulatory changes, there is a chance that a Bitcoin bull run will happen again in the coming months.