Bitcoin’s mining difficulty represents a number which regulates the overall time that miners must include new blocks to the blockchain. Historically, however, there’s somewhat of a pattern that might show a specific correlation between difficulty adjustments and the performance of Bitcoin in terms of price, and we might be on the verge of another bull run.
Next Bitcoin Difficulty Adjustment Coming On November 21st
When it comes to Bitcoin’s mining difficulty, its value is updated on a biweekly manner. This is carried out to guarantee that the average time that it takes to add a new block to the network is kept at 10 minutes.
This is best visualized by prominent analyst PlanB who has recently shared a historical chart on the matter.
— PlanB (@100trillionUSD) November 12, 2019
According to the analyst, the next difficulty adjustment is scheduled for November 21st, and it’s going supposed to be a positive one (+4%), which is marked with a red dot on the chart above. It will follow a blue dot which, which represents a negative adjustment, and it’s curious to see what this means for the price of Bitcoin.
Now, it’s important to note that the adjustments are carried out when 2016 new blocks are added to the network. Depending on whether or not the time required to mine those blocks is more or less than two weeks, the difficulty is being either lowered or increased.
As mentioned, the next adjustment is expected to be a positive one, and it will follow the current change, which was negative, and a blue dot marked it. On the chart, we can see that this happened four times before – in January 2013 and 2015, in August 2016, and in December 2018.
Interestingly enough, the price has reacted positively each time this alignment takes place. In January 2013, it increased by around 53%. In January 2015, the price spiked with about 38% and pulled back after that. In August 2016, Bitcoin’s price increased by about 20%, and in December 2018, it moved from $3,200 towards the middle of the month to about $3,800 towards the end of it, which is an increase of about 18%.
While it’s true that past events shouldn’t be considered an indicator for future ones, if history does repeat itself, we might be in for a bullish 2020.
Bitcoin’s Stock To Flow Models
Another interesting thing to consider here is that Bitcoin’s halving is coming up in May 2020, and it brings forward one of the most important features of the cryptocurrency – its scarcity.
PlanB has more than once compared Bitcoin’s stock to flow model to that of gold and silver. He describes stock as the size of existing stockpiles or reserves and flows as the annual supply of Bitcoin on the market.
According to his ratio, Bitcoin might eventually come in line with gold and silver. The analyst has brought up a model that puts Bitcoin’s market cap at $1 trillion after the halving event, which suggests a price of $55,000 per BTC.