Bitcoin: Decrease in Mining Difficulty and Market Implications
Bitcoin’s automated difficulty adjustment is crucial for network stability. The latest BTC difficulty recalibration marked a decrease of 3.34% to 119.12 trillion, concluding on May 4, 2025, at block number 895,104. This is the first decrease in Bitcoin mining difficulty following four consecutive increases, occurring against the backdrop of diminished total computational power within the network. Interestingly, many analysts had anticipated a steeper decline – as much as -6% – considering the post-halving hash rate exodus. However, the actual decline proved milder, suggesting that the reduction in miner activity was less significant than expected.
Difficulty Adjustment Mechanism and Its Importance
The Bitcoin mining difficulty adjustment is a key mechanism of the protocol that ensures the stable operation of the network. The algorithm automatically adjusts the difficulty every ~2016 blocks (approximately every two weeks) to maintain an average block time of around 10 minutes. If the total Bitcoin hash rate rises (indicating more computational power competing for block discovery), the protocol increases the difficulty; conversely, when the hash rate falls, as it did now, the difficulty decreases, preventing block time from slowing down or speeding up significantly. This self-regulating process allows the network to maintain consistent throughput and security, regardless of the influx or outflux of miners. For investors, this mechanism serves as an indicator of decentralization and network resilience: even amid market shifts or the shutdown of certain equipment, Bitcoin continues to produce blocks at a targeted speed, reinforcing trust in its infrastructure.
The 3.34% decrease in difficulty signals a recent reduction in computational power engaged. In other words, some miners either temporarily shut down their equipment or exited the game – likely due to diminishing profitability. However, this drop in difficulty has a positive side: remaining active miners now find it somewhat easier to mine new blocks. The BTC difficulty reassessment acts as a sort of “auto-balance” for the network’s economy, softening the impacts of sharp fluctuations in hash rate. In this instance, the decrease in difficulty provides miners with a brief respite after an extended period of record high workloads.
Impact on Miner Profitability and the Hashprice Metric
The difficulty adjustment directly affects mining profitability. The metric known in the industry as hashprice (or the “hash price” – revenue in dollars per unit of hash rate, such as per 1 PH/s per day) was under significant pressure leading up to the recalibration. By the end of April, hashprice had dropped to approximately $40 per 1 PH/s per day – the lowest level since mid-September 2024. The decline in this indicator was influenced by a slew of fundamental factors: a general decrease in cryptocurrency prices in April, a sharp reduction in transaction fees, and record-high network difficulty prior to the recent decline. Together, these issues drastically compressed miners’ margins, especially for operators with average performance metrics.
In this context, the recent easing of difficulty is perceived as a much-needed reprieve. Now, thanks to the decrease in difficulty and a recent rise in Bitcoin’s price, hashprice stands a chance of recovering. Following an increase in BTC price above $95,000 (at the end of April), the mining economy began to improve: if the current price level is maintained and the difficulty decreases, miner profitability could rise to around $50 per PH/s, resulting in a partial rebound from recent lows. In simpler terms, each unit of computational power (e.g., a single advanced ASIC miner) now yields slightly more Bitcoin and, consequently, dollars in revenue than it did two weeks ago. This enhances the survivability of industry players, particularly those operating on the edge of profitability.
It should be noted that fundamental factors influencing mining profitability remain a focal point for investors and analysts. Such factors include:
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BTC Price. An increase in the BTC price directly enhances miners' revenue per mined block. The volatility in April illustrated this: following a dip to ~$74,500 at the beginning of the month, Bitcoin rebounded 32% to nearly $98,000, significantly boosting dollar earnings for miners.
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Block Reward and Halvings. In April 2024, a planned halving occurred – reducing the reward from 6.25 BTC to 3.125 BTC per block. This halved the base income of miners, instantly raising the breakeven threshold for equipment. Such shocks can only be offset by increases in prices or reductions in operational costs.
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Network Difficulty and Hash Rate. These parameters dictate how many miners must share a fixed income. When Bitcoin mining difficulty reaches record highs, as it did prior to the recent recalibration, the share of each miner declines, thereby reducing profitability per unit of hash. The opposite scenario occurs with falling hash rates: decreased competition enhances the odds of remaining miners receiving rewards.
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Energy Efficiency of Equipment. The latest ASIC devices with low energy consumption (J/TH) can mine BTC at lower costs. Outdated equipment, which consumes more electricity per unit of hash, experiences higher production costs and is the first to exit the market when profitability drops.
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Electricity Costs. Energy rates represent one of the largest expenses for miners. Cheap energy at farm locations (e.g., renewable sources or excess supply in energy markets) provides a competitive advantage. Conversely, rising electricity prices directly impact margins.
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Transaction Fees and Other Revenues. During periods of network congestion, transaction fees can temporarily boost miners' revenues. However, in calmer periods, as in April, fees are low (with the average fee dropping below $2), making block rewards the main income source.
The balance of all these factors determines the current mining profitability. In the situation at hand, the reduction in difficulty has slightly improved the balance in favor of miners, but the long-term sustainability of the industry still requires either further increases in BTC prices or the adoption of more efficient technologies to elevate hashing profitability to a new level.
2024 Halving and the Shutdown of Outdated Equipment
Why did the network difficulty begin to decline right now? The primary reason is the April 2024 halving, which significantly reduced rewards for miners, consequently lowering their profitability. After the halving, many operators with less efficient setups faced margin reductions to critical levels. Prior to the halving, specific models of ASICs (especially older generations) were still generating modest profits, but after the reward was cut by 50%, they became unprofitable unless BTC’s price doubled immediately. As a result, a gradual exit from the market of outdated equipment began.
Network data confirm this dynamic. At the beginning of April, Bitcoin's total hash rate reached historic highs – exceeding 900 EH/s (exahashes per second). However, by the end of the month, following the halving, the 7-day average hash rate plummeted to ~820 EH/s. This indicates that some power was shut down. First and foremost, the least energy-efficient setups – those "obsolete" chips that could not withstand the new economic landscape – exited the network. The decrease in difficulty to 119.12 trillion was a direct consequence of this hash rate rollback: the protocol eased mining conditions in response to decreased competition to maintain the targeted 10-minute block interval.
It’s important to emphasize that such a “exodus” of miners following a halving event is an anticipated phenomenon. Similar patterns have been observed in previous cycles, although the scale depends on market conditions. In this case, the situation was alleviated by the fact that the price of Bitcoin was already relatively high by the time of the halving (by spring 2024, BTC had reached historic highs, trading around $100,000). This price buffer allowed many miners to endure. Moreover, unlike in 2020, miners were better prepared this time: in the months preceding the halving, they actively upgraded their machine fleets and even sold portions of mined coins to lock in profits for new equipment purchases. According to CryptoQuant, from January 1 to early April 2024, the volume of BTC on miners' balances decreased by more than $866 million – a stark contrast to behavior before the 2020 halving when miners, on the contrary, increased reserves. Thus, the industry entered the post-halving period more technologically prepared, but with a lower reserve of coins on its balance sheets.
Nevertheless, after the halving, miners' margins remained under pressure. In April, total daily revenue from blocks (in dollars) dropped approximately 6% relative to March, despite the increase in prices – as the reward cut had its effect. Therefore, when the hash rate began to decline at the end of April, it was interpreted as a sign that some players were capitulating. In the industry, such episodes are referred to as "miner capitulation," often coinciding with local market bottoms. However, the current case is unique: the shutdown of equipment is not happening in a bear market, but rather after a significant rally in Bitcoin, suggesting that it is driven more by a structural adjustment in the industry post-halving than by panic selling.
Market Reaction and Fundamental Signals
The Bitcoin market responded to the difficulty change quite calmly. This event was largely anticipated by participants: a slowdown in block production and a drop in hash rate had signaled an impending recalibration. As a result, the BTC price at the beginning of May remained stable, continuing to trade within a range close to recent highs. According to exchanges, Bitcoin consolidated around $95,000–$97,000, just below the psychological threshold of $100,000, after an impressive rise in April. As noted in the Bitfinex Alpha report, April concluded for Bitcoin with a ~14% increase, exceeding historical average rates for the month. Throughout the month, BTC initially experienced a sharp correction down to ~$74,500, only to then rebound, reaching ~$98,000 by early May. This bounce demonstrated market resilience despite macroeconomic turbulence and the halving event.
Fundamental on-chain metrics currently display predominantly positive signals. Contrary to concerns, Bitcoin reserves on wallets of mining pools and major miners have remained relatively stable in recent weeks. In other words, no mass sell-off of mined BTC has been observed – at least among the largest players. The Puell Multiple indicator (the ratio of market value of production to its average value over the year) is also in a neutral zone, suggesting that miners do not feel an acute need to liquidate reserves. All of this points to market participants' confidence in Bitcoin's further growth: even with increased difficulty, miners are optimistic about improving conditions (through price growth or subsequent difficulty adjustments) and are not rushing to "give up positions." Analysts at Bitfinex emphasize that structural signals remain bullish, creating a basis for a potential continuation of the current growth cycle after macro stabilization.
In the short term, traders are watching the $100,000 level as a key resistance: overcoming it could attract new capital flows and accelerate the rally, while failure to breach it keeps BTC in consolidation. The nearest technical supports are seen at $90,000 and further around $75,000 (April lows), where significant demand entered the market. Volatility following the difficulty recalibration remained moderate, indicating market maturity: unlike previous cycles, automated changes in network parameters are now perceived by investors as routine occurrences. For major players and institutional investors, such events rather reinforce BTC's reliability and predictability as an asset. It is no surprise that institutional investments in Bitcoin continue to rise, given improvements in fundamental network metrics and its ability to self-regulate. Many funds are incorporating hash rate dynamics and difficulty into their long-term price models, seeing the health of the mining sector as a leading indicator for the BTC market.
Strategies of Public Mining Companies: Selling BTC and Embracing AI
The decline in mining profitability following the halving has prompted public western mining companies to reassess their strategies. In 2022–2023, many of them accumulated Bitcoin on their balance sheets, anticipating a price increase. However, in 2024, the trend has shifted: as the halving approached, public miners began actively selling portions of their coins to strengthen their financial standing and invest in upgrades. The post-halving period has only amplified this trend – as noted, the liquidation of BTC reserves among public miners has accelerated amid dwindling profitability. This was confirmed by financial reports: for instance, mid-tier companies like CleanSpark regularly sold mined Bitcoin to fund operational expenses and purchase new equipment. This strategy allowed them to expand their hash rate even under constrained conditions, albeit at the cost of their "crypto treasury."
However, the largest players in the industry display different approaches. Marathon Digital Holdings (MARA) has focused on increasing its market share at all costs. In the months following the halving, Marathon significantly boosted its computational power – achieving an average operational hash rate of ~25.7 EH/s in May 2024, a 22% increase from April. By increasing its share of the overall power (from 3.2% to 4.2% over the month), Marathon mined 616 BTC in May – just 27% less than in April before the halving, even though the reward had dropped by 50%. According to CEO Fred Thiel, the increase in blocks found (170 compared to 129 the previous month) partially offset the halving effect. The company continues to adhere to a strategy of holding a significant portion of mined Bitcoin: by the end of May 2024, its reserves reached 17,857 BTC (around $1.5 billion in cash). Thus, Marathon leverages its accumulated reserves and capital access to endure margin declines, betting on long-term BTC price growth. Overall, for investors in mining stocks, this approach means a high correlation with Bitcoin prices – effectively making Marathon a pure “play on BTC,” maximizing exposure to its growth.
In contrast, Riot Platforms (RIOT) – one of the largest Bitcoin farms in the U.S. – chose a different tactic, refocusing on AI infrastructure and HPC (high-performance computing), diversifying its business model. In 2025, the company announced a shift in priorities: instead of aggressively expanding mining in Texas, Riot will establish a large data center for cloud computing and artificial intelligence at its new Corsicana (Texas) site. For this, Riot even canceled the previously planned expansion of mining capacity (halting phase two construction of 600 MW) and lowered its target hash rate for 2025 from 46.7 EH/s to ~38 EH/s. This move reflects a broader trend in the industry: mining companies increasingly recognize the growing demand for computing power from tech companies (data processing, machine learning) and strive to utilize their equipment and energy contracts in new segments. Essentially, large Bitcoin miners possess what is highly valuable for the AI industry – access to cheap electricity, ready infrastructure for cooling, and large data center management. By housing AI servers, they secure a diversified revenue source with more predictable contracts. Investors have already recognized this strategy: earlier in 2024, the stocks of miners announcing the launch of HPC initiatives frequently outperformed purely Bitcoin-focused companies. However, recent dynamics have shifted – according to JPMorgan, in Q2 2025, companies actively investing in AI even lagged in growth behind those with a focus on mining. This may reflect the rapid ascent of Bitcoin prices themselves: pure miners took full advantage of the rally, while diversified firms temporarily reduced their sensitivity to price fluctuations. Nevertheless, from a long-term sustainability perspective, the combination of mining and HPC business may lower risks and smooth revenue cyclicality.
Crucially, even as it diversifies, Riot is not exiting mining entirely and maintains faith in Bitcoin. The company continues to mine effectively: in March 2025, Riot produced 533 BTC – a new record monthly volume post-halving, partially due to enhanced efficiency and cheap electricity (rates around $0.038 per kWh). Riot also increased its Bitcoin treasury to 18,692 BTC (as of February 2025), up 132% year-on-year. Notably, unlike many competitors, Riot has sold almost no mined coins, betting on their value appreciation. Therefore, the company simultaneously maintains significant exposure to BTC while laying the groundwork for revenues outside of the cryptocurrency sector. For investors, this "bet on both horses" strategy can be appealing, though it carries risks of missing out on explosive BTC price growth (if resources are diverted to HPC) or, conversely, the risks associated with the capital-intensive transition into a new domain.
Aside from Riot and Marathon, other public miners are also actively adapting. For example, Hut 8 Mining and US Bitcoin Corp announced a merger, aiming to synergize resources and reduce mining costs. Hive Digital Technologies (formerly Hive Blockchain) previously redirected its GPU farms to cloud computing, mining other PoW coins, and providing data center services for AI after Ethereum transitioned to PoS. Bitfarms and CleanSpark focus on geographical diversification of their farms and utilizing cheap energy (in Canada, Argentina, the U.S.), regularly selling a portion of their production to fund expansion. Even traditional players in the energy sector and engineering giants are increasingly investing in mining by building joint data centers and providing excess energy supply to miners, regarding it as part of their energy resource monetization strategy. The share of institutional capital in the mining sector has notably risen: public companies easily attract hundreds of millions of dollars through exchanges, bonds, and even direct investments from funds seeking indirect exposure to Bitcoin while hedging risks.
Bitcoin Price Outlook: Technical Analysis
Following the latest difficulty recalibration, the Bitcoin market exhibits measured optimism. Currently, BTC's consolidation below $100,000 is viewed by analysts as an accumulation phase before a potential new impulse. From a technical standpoint, daily charts indicate a healthy correction: the RSI (Relative Strength Index) has exited overbought territory following the April rally, and moving averages have aligned, confirming a neutral momentum in the short term. The lack of a clear trend within the $90,000–$100,000 range reaffirms this neutrality – the market has taken a pause to reassess the balance of power.
The key resistance level of $100,000 remains firmly in focus. A breakout on significant volume could catalyze an acceleration of the upward trend given the psychological importance of a six-figure price and the possible triggering of buy orders from large players. Conversely, the nearest support is evident around the $90,000 mark, where demand had previously concentrated. A deeper safety net for bulls is positioned at $75,000 – the April low, from which BTC sharply rebounded. As long as the fundamental picture (network growth, miner behavior, institutional interest) remains favorable, the likelihood of retesting such low levels is minimal. However, even if a correction deepens, many analysts view the $70,000–$80,000 range as an attractive entry point for institutional investors who missed the previous rally.
Given the improvement in mining metrics following the difficulty reduction, selling pressure from mined coins in the short term may ease. Miners have gained some relief and, as noted, currently show no readiness to aggressively sell off reserves. This removes a potential source of BTC supply on the market. Together with ongoing interest from major investors (including anticipation of a Bitcoin ETF approval and capital inflows into crypto funds), the current state of the network forms a robust foundation for further BTC price growth. However, volatility will remain: external factors – from regulatory news to conditions in traditional markets – can still invoke sharp price movements.
The recent Bitcoin difficulty recalibration showcased the flexibility and resilience of the network in the post-halving era. The modest 3.34% reduction in difficulty, instead of the anticipated 6%, indicates that the mining industry is adapting to new conditions without dramatic upheavals. Miners have navigated the reduction in awards, partly compensating through price growth and efficiency, while Bitcoin's automatic algorithm maintained economic equilibrium by alleviating difficulty. For institutional and private investors, these developments are significant indicators of ecosystem maturity: the Bitcoin network remains self-regulating, robust, and attractive for investments. The mining sector, while experiencing temporary challenges, demonstrates readiness for change – from selling accumulated BTC to exploring AI infrastructure – which, in the long term, may strengthen both the companies themselves and the reliability of the entire network. Ultimately, the health of miners and their adaptability positively reflect on the BTC market, bolstering trust in Bitcoin from major investors and setting the stage for a new phase of growth.
