Bitcoin mining difficulties set to create further price volatility.

Bitcoin has taken a real pounding recently – with the price dropping temporarily under $180 USD.

This is incredibly significant as it is a breach of the 1000 Chinese Yuan. This is a significant barrier as over 65% of all bitcoin trades are carried out in this currency.

This price has caused some real issues for mining operations – which quite simply are no longer profitable. The difficulty of mining will reduce in time to a level where it makes it more profitable, however, this will itself cause it’s own issues.

The bitcoin infrastructure is designed to release a new bitcoin mining block (25BTC) every 10 minutes – the mining process is what maintains and keeps the network functioning correctly.

As mining difficulty takes time to adjust the time between block creation briefly reached 12 minutes. As the difficulty hasn’t immediately adjusted this will probably cause two things to happen. Firstly many miners will choose to down tools rather than spend their valuable fiat currency on electricity and hardware maintenance costs. Secondly many miners are so heavily invested they will continue to produce unprofitable blocks – probably holding them until such a time as the price starts to improve or stabilize. There will probably then be a frenzied sell off as mining operations take profits.

What ever happens the immediate future does not look bright for the bitcoin community.

What are your thoughts regarding the recent price drop and how this will affect the future of bitcoin?

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