Bitcoin hashrate and mining difficulty have become more sensitive to changes in the cryptocurrency's price since the beginning of the year, according to quantitative analysts at JPMorgan.
The beta of mining difficulty relative to the Bitcoin price has increased to 0.62 over the past six months. This increase in beta is consistent with the assumption that an increasing proportion of miners are operating near the breakeven point, making the aggregate hashrate more sensitive to Bitcoin price fluctuations.
A significant portion of network participants are operating near the cost curve, forcing miners to turn equipment on or off even with minor price movements. When Bitcoin trades below its cost of production, high-cost miners turn off equipment, the hashrate declines, and network difficulty adjusts downward.
This pattern was clearly evident in the second week of June, when difficulty fell by 10%—the second decline of this magnitude this year. The previous similar decline occurred in January.
JPMorgan expects the increased sensitivity of the hash rate to the Bitcoin price and the high frequency of significant mining difficulty adjustments to persist as long as the Bitcoin price remains significantly below its production cost, currently estimated at $78,000.