Bitcoin mining difficulty hits all-time high, above 50 trillion hashes

Key Takeaways

• Bitcoin mining difficulty has surpassed 50 trillion hashes for the first time ever
• Higher difficulty means more competition and less profit for miners, but also more security for the Bitcoin network
• Higher mining difficulty means greater energy input required to mine Bitcoin, meaning greater cost for miners
• Mining stocks have underperformed Bitcoin significantly over the last year

It has never been so difficult to mine Bitcoin. Literally. Bitcoin mining difficulty continues to rise incessantly, surpassing the 50 trillion hash mark for the first time ever last week.

What is Bitcoin mining difficulty?

If it were not for the Bitcoin mining difficulty adjustment, blocks would be appended to the blockchain at an increasing speed as more miners joined the Bitcoin network. In such a way, the Bitcoin mining difficulty adjusts via an automatic algorithm to ensure blocks are appended to the ever-growing blockchain at consistent 10 minute intervals.

As more miners join the network, difficulty rises. In such a way, blocks do not get discovered quicker as more miners join the network. This difficulty adjustment is thus vital to ensure the supply of Bitcoin is released at a pre-programmed pace, as outlined by the anonymous Satoshi Nakamoto in the Bitcoin whitepaper. 

This explains how, in the early days, mining could be carried out on a personal laptop, because Bitcoin was so niche and miners were so few and far between – hence the mining difficulty was far lower. This is why you hear stories of miners who find (or lose) stashes of Bitcoin on old hard drives which were close to worthless when they were mined. 

Today, however, Bitcoin is well and truly in the mainstream, and mining difficulty has risen accordingly. Most mining is carried out by supercomputers, while there are many public companies carrying out the task.  

What does increasing mining difficulty mean?

Mining difficulty is increasing because more computational power is being put towards Bitcoin mining. The hash rate is what we refer to as the computational power of the Bitcoin network. Looking at the chart, this is at an all-time high – which makes intuitive sense, given mining difficulty is also at an all-time high. 

For the Bitcoin network as a whole, this is a good thing. Bitcoin’s hash rate is a crucial indicator of the security of the network. A higher hash rate means Bitcoin is more resistant to an attack by a malevolent actor. This is because the higher the hash rate, the more expensive and implausible it is for an actor (or a group of actors) to seize control of 51% of the network, when Bitcoin could be exposed to what is known as a 51% attack (coins could be double spent and the veracity of the blockchain would be in doubt). 

However, there are downsides to this, too. I detailed this in depth last week in a report on Bitcoin mining stocks. In summary, more hash power means greater cost for miners, as the increased difficulty means a greater amount of energy is required to power the computers working to validate the transactions on the blockchain. This is why miners margins are getting cut into as more miners join the network (rising electricity costs also do not help). 

“The rapid decline in the Bitcoin price, down from $68,000 at the peak of the bull market in late 2021, has obviously hurt the mining industry”, says Max Coupland, director of CoinJournal. “However, that is far from the only problem facing miners. The mining difficulty hitting an all-time high means greater amounts of energy are required to mine, at a time when inflation and the Russian war have pushed the price of energy up immensely”. 

The mining industry is hence extremely volatile, as not only is it sensitive to the volatility of Bitcoin itself, but it also suffers from rising energy costs. The below chart demonstrates how mining stocks have underperformed Bitcoin in recent times. It looks at the Valkyrie Bitcoin Miners ETF, which tracks mining companies and was launched in February 2022. 

With Bitcoin mining difficulty hitting an all-time high, racing past the 50 trillion hash mark for the first time ever, things won’t get any easier for miners. However, like always, it will ultimately come down to the Bitcoin price. With block rewards and transaction fees recouped in the form of Bitcoin, and the entire industry built upon this asset, mining companies will go as far as the Bitcoin price takes them.

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Ethereum gas fee sinks close to 70% in under a month

• Ethereum gas fee tanked all the way down to under $5 in May.
• BlackRock CEO Larry Fink reiterates dedollarisation as a real risk.
• Ethereum is currently down more than 10% versus its YTD high.

Ethereum gas fee declined by close to 70% in just under a month, data from Santiment – an on-chain data provider confirmed on Thursday.

Ethereum gas fee is back under $5

Interestingly, that said fee was seen at a year-to-date high of $14 per transaction in early May. By the end of the month, though, it tanked all the way down to under $5. The Santiment report reads:

More affordability encourages more utility. Additionally, crypto’s number 2 asset is at an all-time low 9.9% on exchanges as selfcustody reigns.

Earlier this week, strategists at JPMorgan warned that Ethereum could see a sell-off in the coming months following its recent Shanghai upgrade that shifted the Ethereum network to a more energy efficient proof-of-stake.

ETH is currently down over 10% versus its year-to-date high.

Could Ethereum surge in coming months?

On the flip side, though, there are catalysts that could push Ethereum up moving forward as well. For one, BlackRock CEO Larry Fink this week reiterated dedollarisation as a real risk.

The United States is jeopardising its reserve currency status with U.S. debt ceiling drama. There will be pockets of problems, like the commercial real estate.

The recent banking crisis has also shaken confidence in the fiat currencies. That has also pushed many to crypto assets like Bitcoin and Ethereum which are seen as safer alternatives.

In 2022, BlackRock itself launched a spot Bitcoin private trust for U.S. clients and also partnered with the crypto exchange Coinbase.

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Cardano price prediction for June: Is ADA a buy or sell?

• Cardano has strong fundamentals as the total value locked jumps.

• Its DeFi TVL has jumped to the highest level on record.

Cardano price had a difficult performance in March as cryptocurrencies recoiled. ADA slipped to a low of $0.36, where it has been in the past few days. This price is about 22% below the highest point in May, meaning it has now moved to a bear market. The coin’s market cap has plunged to about $12.3 billion.

Fundamentals meet technicals

Cardano price struggled in May even after its ecosystem recorded some significant growth during the month. A good way to look at the performance of a chain like Cardano is to look at the performance of its Decentralized Finance (DeFi) ecosystem.

The latest data shows that activity in Cardano’s DeFi ecosystem is doing well. According to DeFi Llama, the TVL in Cardano jumped by more than 9% in May to over $202 million. That increase pushed it to the highest level since May last year.

Notably, the TVL soared to a record high in ADA terms. It is now sitting at 536.84 million ADA, which is higher than the year-to-date low of 263 million ADA. This is a signal that there is strong demand for dApps created in Cardano like Minswap, Indigo, Liquid, WingRiders, and MuesliSwap. MinSwap and Indigo’s TVL has jumped by over 20% in the past 30 days.

The same trend happened in the number of active users. According to DeFi Llama, the total number of active users in Cardano jumped to more than 81.93k in May. 

Therefore, Cardano’s underperformance was not because of its weak fundamentals. Instead, it is because of the broader performance of the crypto market. In May, we saw Bitcoin price retreat from the year-to-date high of $31,000 to about $25,500. It dropped because of the debt ceiling issue and the rising hopes that the Fed will maintain its hawkish tone.

Cardano price prediction

The daily chart shows that the ADA price has pulled back in the past few days. It has dropped below the important support level at $0.42, the highest point on February 15. The coin is consolidating at the 50-period moving average.

Most importantly, it seems like it has formed a double-top pattern, which is usually a bearish sign. Therefore, we can’t rule out a situation where the coin drops to the next key support level at $0.298, the lowest point on March 11. A move above the double-top point at $0.422 will invalidate the bullish view.

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Arbitrum-based Jimbos Protocol hacked for $7.5M, JIMBO price drops 40%

• The Jimbos Protocol team acknowledged the hack and said it had contacted law enforcement.
• Blockchain security platform PeckShield noted the attack followed a compromise on Jimbos liquidity conversion mechanism.
• The price of JIMBO, the underlying liquidity token, fell by 40% as the market reacted to the hacking news.

Arbitrum-based Jimbos Protocol was hacked on the morning of May 28, resulting in the loss of over 4,000 Ether (ETH), worth approximately $7.5 million at the time.

As a result of the hack, the price of the underlying token, Jimbo (JIMBO), has plummeted by 40%.

Another day, another hack

Malicious attacks within the cryptocurrency sector continue to be a blot on the growing industry, with attackers exploiting vulnerabilities to steal assets worth millions of dollars from platforms and users. The latest is an attack that exploited Jimbos’ liquidity conversion mechanism to see 4,090 ETH tokens stolen.

Jimbos Protocol is a relatively new protocol that was launched less than 20 days ago. The protocol aims to address liquidity and volatile token prices through a new testing approach. However, it looks like the protocol’s mechanism was not adequately secured, with the result being the vulnerability that was exploited by the hacker.

According to blockchain security and data firm PeckShield, the hacker was able to reverse swap orders for their own gain, resulting in the loss of funds.

The company tweeted its assessment following the unfortunate event:

“This hack is due to the lack of slippage control of liquidity-shifting operation — such that the protocol-owned liquidity is invested into a skewed/imbalanced price range, which is exploited in reverse swap for profit.”

The Jimbos Protocol team announced it was “aware” of the attack and that they had contacted law enforcement and blockchain security professionals.

Earlier this month, as reported here, an attacker compromised the Tornado Cash protocol and stole 483,000 TORN tokens. They then moved to swap these tokens into ETH. The attacker managed their exploit by seizing control of the Tornado Cash governance system. 

TORN price fell 50% in reaction to the news.

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