Bitcoin sees first negative mining difficulty adjustment since September 2024

Bitcoin mining difficulty has recorded its first decline in four months, marking the end of a streak that saw it rise eight consecutive times. According to data from Cloverpool, the mining difficulty fell 2.12% in its latest adjustment on January 27, which occurred at block height 880,992.

With the adjustment, mining difficulty fell from its record high of 110.45 trillion to 108.11 trillion. Mining difficulty determines how much work miners do in validating transactions on the Bitcoin network and earning rewards. Its current level implies that it is 108.11 trillion times more challenging for a miner to mine BTC now than the genesis block.

The decline in difficulty represents a positive development for Bitcoin miners as it signifies that the computing power required for mining Bitcoin has slightly reduced. However, the BTC hash price, the amount Bitcoin miners will earn per PH/s, has also been reduced to $58.15.

This is mostly due to the recent plunge in BTC value, with the flagship asset losing more than 5% of its value and dropping below $100,000 for the first time since Donald Trump’s inauguration. Despite the decline, MicroStrategy announced the acquisition of 10,107 BTC for around $1.1 billion.

Why mining difficulty reduced

The fall in mining difficulty after eight consecutive increases is not a surprise, given Bitcoin hashrate performance over the past few weeks. The hashrate, which refers to the available computing power on the Bitcoin network, determines how mining difficulty adjusts every two weeks.

According to CoinWarz, the Bitcoin hashrate fluctuated during that period, rising as high as 884.16 EH/s and falling to 671.6 EH/s with an average of 774.06 EH/s. Cloverpool now estimates that there could be consecutive declines in mining difficulty if the hashrate remains low.

Meanwhile, declining hashrate signals that several Bitcoin miners have stopped or reduced production capacity in the past few weeks. Mining capacity increased substantially in the last quarter of 2024 and earlier this year. It reached a peak of 955.61 EH/s on January 2, 2025.

However, consecutive increases in mining difficulty and the stagnating price of Bitcoin after peaking at $109,000 meant that several miners struggled to stay profitable under those conditions, forcing many of them to capitulate once Bitcoin dropped below $100,000.

Bitcoin miners’ stocks struggle

Meanwhile, mining difficulty and the declining Bitcoin price are not the only challenges facing Bitcoin miners currently. The success of the Chinese AI model DeepSeek also led to a massive meltdown in the stock market.

Publicly traded miners such as Core Scientific CORZ, IREN Limited IREN, Terawulf WULF, Bit Digital BTBT, and Marathon Digital all saw declines in their pre-market value, ranging from 15.77% for CORZ to 5% for MARA.

The decline reflects a broader market capitulation, which saw big tech companies such as Nvidia, Microsoft, and Amazon record sizable drops in value due to concerns that DeepSeek, with its limited financial and hardware resources, is rivaling OpenAI models.

Core Scientific, Terawulf, and other miners that have focused on diversifying their revenue by hosting high-performance computing infrastructure (HPCs), which is needed for AI training, suffered the most losses.

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Correlation between listed miners’ performance and BTC Hash price since halving. (Source: James Butterfill)

Despite the premarket decline for publicly listed Bitcoin miners, CoinShares data shows that their performance has correlated with Bitcoin hash price since the halving event. If anything, this implies that the stocks are trading at par with the miners’ actual performance.