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Bitcoin mining difficulty drops sharply

Bitcoin mining difficulty drops sharply

created Simon petersDecember 7, 2022

Price Bitcoin was largely stable last week as it entered its third week of trading around the $17 mark. The price of this cryptocurrency has largely been left alone in the wake of a major sell-off in early November, and it seems to be in a bit of a downtrend at this point.

Ethereum meanwhile, it saw some price movement last week, starting below $1 before rising above $160 until yesterday. Currently, the quote is falling to around $1.

We are now in that time of year where price predictions for the year ahead come thick and fast. Perhaps the most eye-catching prediction comes from Standard Chartered, which predicts the price will hit the $5 mark next year.

These types of forecasts and price guides should be taken with a grain of salt, and investors should always focus on the long-term use cases of the assets they hold. Bitcoin has been sensitive to major macro trends in 2022, and this is likely to continue next year. But with a new halving on the horizon, some momentum may start to shift in due course. 

The UK government is stepping up efforts to regulate cryptocurrencies

The UK government is accelerating its efforts to regulate cryptocurrencies in the wake of the crises of the last few months, according to reports Financial Times. The process of codifying the rules for the sector was already underway through the Financial Services and Markets Act, but it looks like the timetable is being brought forward and more detailed rules may now be introduced.

This is a positive development for the sector after several difficult months for many market participants, from investors to institutions. UK regulatory clarity will promote much more stability for these participants, so the result of regulatory clarity is definitely desirable for the sector. 

These regulations are likely to define the cryptocurrency landscape in the UK for years to come. It is essential to protect users while allowing the industry to continue to innovate. The government should avoid a knee-jerk reaction, but Treasury comments at this point are encouraging that this will not happen. 

Bitcoin mining difficulty drops sharply

Difficulty mining new bitcoins fell more than 7%, the biggest drop this year and the biggest drop since July 2021, according to data.

Mining difficulty fell to all-time highs last month as the cryptocurrency struggles with falling prices. Miners are also struggling with headwinds due to rising energy costs, especially as winter approaches.  

While this is instructive for the health of the network - the difficulty goes up and down depending on the number of miners working - it is also a lagging market indicator. But with the price of bitcoin still down, it may be a while before miners start restarting platforms. 

Goldman Sachs on the hunt for crypto opportunities

Major global investment bank Goldman Sachs is looking for cryptocurrency companies with discounted valuations to capitalize on, suggests today report Reuters. This is another interesting signal that while the market is shrinking, smart buyers are looking to play the sector.

This follows last week's news that Goldman Sachs is launching a digital asset platform with the European Investment Bank (EIB) that will enable instant settlement of digital asset sales such as bond auctions. 

It is clear that cryptocurrency market valuations are largely avoided by investors who are looking for opportunities to transact and buy projects at favorable valuations. This is a fairly typical modus operandi for a major player like Goldman, and may offer some comfort to investors that they are not the only ones willing to wait out the crypto winter.

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About the Author
Simon peters
eToro analyst. A graduate of the Faculty of Mechanical Engineering at Brunel University in London. He is CFA UK Level 4 certified in Investment Management.