Bhushan is a FinTech enthusiast and holds a good flair in understanding financial markets. His interest in economics and finance draw his attention towards the new emerging Blockchain Technology and Cryptocurrency markets. He is continuously in a learning process and keeps himself motivated by sharing his acquired knowledge. In free time he reads thriller fictions novels and sometimes explore his culinary skills.
During the latest difficulty adjustment, the Bitcoin network mining difficulty has dropped by over 4% for the first time since July 2021. At the same time, the BTC hashrate has also dropped more than 5% in the last two weeks.
On Wednesday, May 25, the Bitcoin blockchain network underwent a network difficulty adjustment with the mining difficulty dropping by 4.33%. This is the biggest correction in Bitcoin’s mining difficulty since July 2021.
Last year’s drop was the outcome of China’s crackdown on Bitcoin mining causing its hashrate to tank significantly. Due to China’s strict actions, the hashrate collapsed by nearly 50% back then. However, it has completely recovered since then and the BTC hashrate is currently at its new all-time high.
The difficulty adjustments on the Bitcoin blockchain network take place every two weeks. Bitcoin mining difficulty refers to the complexity of the mathematical process behind mining new blocks in the network. With more miners competing for the blocks, the mining difficulty usually increases.
The Bitcoin mining difficulty adjustments usually take place every 2016 blocks. Besides, they happen in sync with the Bitcoin network hashrate.
Last year in July 2021, the difficulty levels dropped by -4.81%. Since then, the difficulty levels have dropped more than 1.5% at one time until now. With the latest difficulty adjustment, the Bitcoin hashrate has also corrected this month. Since May 11, the BTC network hashrate has dropped by 5.43%.
Bitcoin Price Correction and Fair Value
The world’s largest cryptocurrency Bitcoin has been under significant pressure and trading under $30,000 levels for a while. Bitcoin has come under pressure as the global macro setup looks dicey. With soaring inflation, the central banks have no option but to raise interest rates. This will hurt the growth sentiment causing funds to move away from risk-ON assets such as Bitcoin.
However, Wall Street banking giant JPMorgan has recently published a report stating that Bitcoin can see a 28% upside from the current levels. It said that the fair value of Bitcoin is around the $38,000 mark. In a note to their clients, JPMorgan strategists wrote:
“The past month’s crypto market correction looks more like capitulation relative to last January/February and going forward we see upside for bitcoin and crypto markets more generally”.
Interestingly, the banking giant also said that they have chosen Bitcoin and cryptocurrencies as their “alternative” investments. It added that Bitcoin and crypto have entered a profound correction over other asset classes such as private equity, real estate, and private debt. Thus, the bank sees more chances of a rebound in the crypto asset class.
“We thus replace real estate with digital assets as our preferred alternative asset class along with hedge funds,” the bank’s strategists wrote.