Bitcoin (BTC) is looking like it did at its 2018 bear market bottom — and one fundamental is about to repeat a move which has only happened twice in its history.
Analysis of Bitcoin network difficulty following its latest adjustment on June 4 reveals a key similarity to when BTC/USD traded at lows of $3,100.
BTC difficulty on course for historic third
This week, difficulty adjusted down by 9.3%. That followed a downward shift two weeks previously of -6%. If the next adjustment is also negative — it is currently forecast at -7% — it will be only the third time ever that three back-to-back negative adjustments have occurred.
With the exception of December 2018, the only other occasion was the record eight consecutive downward adjustments from 2011.
The phenomenon repeating again could well be significant. Difficulty provides an estimate of miner interest, and taking it down incentivizes participation in Bitcoin transaction validation.
Adjustments are also key to ensuring Bitcoin’s status as “hard” money. Changes in difficulty are automatic every 2016 blocks mined, and allow Bitcoin to regulate itself predictably without compromising security.
Bitcoin mining difficulty chart showing 2018 dip. Source: BTC.com
Bitcoin “working like it was designed to”
In 2020, the situation is complicated coming just weeks after Bitcoin’s third block subsidy halving event, which slashed miner revenue by 50%. As Cointelegraph reported, sell-offs from mining pools continued afterward, with miners selling more coins than they earned.
For well-known commentator WhalePanda, however, current behavior shows that it is business as usual for Bitcoin.
“3 weeks after the #Bitcoin halving the mempool is almost empty again, 1 sat transactions confirming,” he tweeted last week.
“No mining death spiral, even though we lost nearly 50% of the hashrate, it’s bouncing back, next difficulty adjustment down less than 10%. Bitcoin working like it was designed to.”
Lower difficulty should further boost hash rate as miners increase participation. Hash rate has already been climbing after its halving drop, and a common theory suggests that price action follows hash rate upticks.
Three months after its December 2018 lows, BTC/USD began a bull run that topped out at nearly $14,000.
Last year, a new metric claimed that Bitcoin should top out at 1,000% of its 2018 difficulty low.
Source: Cointelegraph.com
