Expected Bitcoin Difficulty in 2018
There are lots of videos and articles on what Bitcoin difficulty is, and lots of charts on how it's changed over the past couple of years. But this isn't really helpful if you're thinking about investing in cloud mining, or maybe even buying your own mining rig.
This guide has our thoughts on what will effect Bitcoin difficulty over 2018.
We focus on key factors that may effect Bitcoin's difficulty in this guide. If you're looking for how profitable certain mining hardware/cloud mining companies are, see our guides on them:
- HashFlare profitability for December 2017
- Genesis Mining profitability for December 2017
- Antminer S9 profitability for December 2017
So let's start by looking at how Bitcoin difficulty has changed every 4 months for the past 3 years:
Sep 2014 - 29.8M
Jan 2015 - 43.9M, Increase of 47%
May 2015 - 48.5M, Increase of 10%
Sep 2015 - 59.3B, Increase of 22%
Jan 2016 - 103.8B, Increase of 75%
May 2016 - 194.2B, Increase of 87%
Sep 2016 - 220.7B, Increase of 14%
Jan 2017 - 336.9B, Increase of 53%
May 2017 - 560B, Increase of 66%
Sep 2017 - 922.7B, Increase of 54%
*Values taken from: https://blockchain.info/charts/difficulty?timespan=3years
NOTE: As of 19th December 2017, many difficulty charts, including the one above, seem to be displaying outdated data. We've posted a video explaining the cause of this here.
Rate of Bitcoin difficulty increase
Looking at the Blockchain chart above for the past 2 years, it definitely looks exponential; e.g. it doubles at the same rate every 4 months. But the figures for the past 3 years don't do that, they vary significantly. In 2015 it took around 11 months for the difficulty to double, in early 2016 around 6 months, in late 2016 around 8 months - and then in 2017 between 5-6 months. Rather than doubling at a consistent interval, it seems to vary based on factors like available hardware and public interest.
What we're suggesting is that the rate Bitcoin difficulty is increasing is not fixed, and can be anticipated. Right now, in December 2017, Bitcoin is very popular, with thousands of new investors and miners every day - so significant difficulty increases are to be expected. Many new people are interested in bitcoin mining, allowing hardware manufacturers to sell miners in larger quantities, causing more total hashpower to be available - driving Bitcoin difficulty up.
The key relationship here is that the amount of new hardware becoming available is strongly linked to the demand for it. A risk is that if the people making these miners produce too many, the difficulty will rise so fast that Bitcoin mining profitability goes down massively. This occured for Dash when the Antminer D3 came out.
There are also scenarios that can cause Bitcoin's difficulty to decrease. August 2017 is a good example of this, where a lot of miners moved their hashpower to mine Bitcoin Cash (as it was more profitable at the time). This decreased hashpower mining Bitcoin - causing Bitcoin's difficulty to decrease for 2 weeks. If you stay up-to-date with these types of scenarios and mine the more profitable coins (Bitcoin Cash in this scenario), you can get extra coins for 2 weeks and sell them immediately for a great return on investment (or just HODL them!).
Another argument suggesting Bitcoin mining will remain profitable long-term is to look at it from the perspective of large mining operations. If you were a miner running a large setup, and Bitcoin mining were to no longer be profitable, then you'd likely start mining something else that was - in if there were no profitable coins for a long period of time, you'd likely have very high operating costs and be forced to shut down your operation eventually. For a smaller miner running just a few Antminers or some cloud mining, this would be less of an issue. So in theory so long as Bitcoin stays popular, you can get cheap electricity and Bitcoin's value continues to increase - based on this principle Bitcoin mining should always stay profitable.
This last argument in particular is very speculative, but something any new miner should be aware of. In a worst-case scenario - if Bitcoin's price were to fall for a long-period of time, even if you had cheap electricity, there's a risk that mining it would no longer be profitable.
Bitcoin Mining Reward Halfing in 2020
One factor that could cause big issues in the long-term is that in June 2020, the reward for Bitcoin mining will half. This will essentially make it half as profitable over night. So if miners are only making a small profit prior to this, they'll then be running at a loss just after it. At this point open-ended contracts on sites like Genesis Mining will likely no longer be profitable (although they might not even last that long).
*If you think we're wrong here, tell us! Part of why we made this site is because of all the misinformation floating around out there, so we'd like to keep our guides as accurate as possible.
You can contact us here!
DISCLAIMER: This site cannot substitute for professional investment or financial advice, or independent factual verification. This guide is provided for general informational purposes only. Anything Crypto is UK-based and not regulated by the FCA (Financial Conduct Authority). The group of individuals writing these guides are cryptocurrency enthusiasts and investors, not financial advisors. The ideas presented are our analysis, learning & opinions on a range of cryptocurrency topics. Trading or mining any form of cryptocurrency is very high risk, so never invest money you can't afford to lose - you should be prepared to sustain a total loss of all invested money.
This website is monetised through affiliate links. Where used, we will disclose this and make no attempt to hide it. We don't endorse any affiliate services we use - and will not be liable for any damage, expense or other loss you may suffer from using any of these. Don't rush into anything, do your own research. As we write new content, we will update this disclaimer to encompass it.
January 13th, 2018
Bitcoin Difficulty Prediction Mistakes in 2017
January 13th, 2018
HashFlare vs Genesis Mining (December 2017)
Written by the Anything Crypto team
We first discovered Bitcoin in late 2016, and wanted to get everyone around us involved. But no one seemed to know what it was! We made this website to try and fix this, to get everyone up-to-speed!
Never invest money you can't afford to lose.
All information on this website is for general informational purposes only, it is not intended to provide legal or financial advice. We encourage you to consult your own legal & financial advisors before making any cryptocurrency-related purchase.