Recently, Bitcoin mining has been the talk of the industry, given the anticipated increase in difficulty among the almost consistent prices of Bitcoin.
The cost of mining Bitcoin in the current times has hiked up to $19.3k, which most likely would not act in favor of miners. The experts are counting on the current all-time high values of network hashrate and difficulty level adjustment behind the high cost of Bitcoin production. The cost of Bitcoin production is calculated via a “difficulty regression model” focusing on mining difficulty to estimate values.
Analysts suggest the relevance of difficulty as a significant feature in determining the cost of Bitcoin production. It is a feature of the Bitcoin blockchain that can manage the amount of hashes miners will require to make a block on the network. The difficulty level is directly proportional to the network’s hashrate, the total computing power connected to the chain. If the hashrate increases, so do the difficulty level, as the network wants to keep the block production rate constant.
The difficulty regression model doesn’t use extensive data as a calculation prerequisite and doesn’t involve much complex data about mining equipment, power, and other miscellaneous expenses. Still, it estimates an average cost using the assumption that the mining difficulty level already counts for all these factors in one place.
Based on data from Glassnode, the difficulty regression model has increased overall in recent times. The reason for it is the ongoing surge in the hashrate leading to the difficulty breakout in the crypto industry. Due to the increasing cost of production, miners have to incur expenses worth $19.3k to mine 1 Bitcoin.
Presently, the price of Bitcoin hasn’t seen much of a surge, and the graph has continued to move sideways; therefore, with the rising cost of production, the miners are making little to no profit, if not incurring losses.
In 2018, it was the last time the Bitcoin cost of production had even exceeded the price at that time, triggering a miner capitulation that continued for months. Hence, if the difficulty of regression increases and the prices don’t do the same, a similar capitulation can be expected. At the time of writing, the price of Bitcoin is recorded at $20,325.90, a 1.19% surge from the past day.