Bitcoin Signals Bearish Warning as Mining Difficulty Collapses, Worst Since China Ban

▲ Bitcoin (BTC), cryptocurrency mining/ChatGPT-generated image

Bitcoin (BTC) mining difficulty has recorded its largest drop since China’s mining ban, sending a strong signal that the cryptocurrency market is entering a full-fledged bear phase.

According to U.Today on February 12 (local time), Bitcoin network mining difficulty plunged 11.16% in the latest adjustment cycle. J.A. Maartunn, an analyst at on-chain data analytics firm CryptoQuant, noted that this marks the largest downward adjustment since July 2021, when China imposed a sweeping ban on virtual asset mining, triggering a market crash. The decline ranks as the 10th largest in Bitcoin’s history, suggesting a massive reset in the network’s hash power dynamics.

The sharp drop in mining difficulty means it has become significantly easier for individual miners to generate Bitcoin blocks. However, this also indicates a reduction in the computational power securing the network, posing potential challenges from a security standpoint. Market experts point out that this hash rate adjustment coincides with Bitcoin’s roughly 46% decline from its all-time high of $126,198.07, calling it one of the decisive indicators confirming the arrival of a bear market.

Recently, Bitcoin has been attempting a recovery while defending the key support level of $66,000, but investor sentiment remains frozen. The Fear and Greed Index has fallen to levels seen during the collapse of crypto exchange FTX, reflecting one of the worst downturns in market history. While the Relative Strength Index (RSI) entering oversold territory may provide grounds for a gradual rebound, skeptics such as Peter Schiff warn that prices could plunge to $10,000, heightening market tension.

On the other hand, optimists including Samson Mow continue to uphold a $1 million price target for Bitcoin, emphasizing its long-term value appreciation. Ongoing accumulation by companies such as Strategy is also cited as a factor supporting market fundamentals. Historically, record declines in major indicators have been followed by gradual recoveries, leading investors to closely watch whether this difficulty adjustment could lay the technical groundwork for a new upward cycle.

The Bitcoin network now stands at a critical crossroads where the risks of weakened security intersect with opportunities for improved mining efficiency. The chain reaction sparked by the sharp drop in mining difficulty and capital flows from major institutions are expected to be decisive variables for future price movements.

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