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Markets report: Bitcoin passes $15.6K as difficulty drop normalizes fees

Bitcoin begins to rebuild miner strength while retaining higher prices as network performance runs exactly to schedule

Bitcoin is cementing $15,500 support on November 11 as positive news from within the industry and beyond buoys the bulls.

Data from price trackers including CoinMarketCap shows BTC/USD retaining $15,000 support over the past 24 hours, with lows of $15,125. Highs of $15,700 have followed, with press-time levels focusing on $15,600.

Since major volatility abated earlier in the week, Bitcoin has seen a trading corridor emerge in the lower $15,000 range, something which analysts consider may continue before a breakout occurs. 

This specifically would take the familiar form of a series of lower highs and higher lows—so-called “compression”—before a decisive move up or down.

Difficulty adjustment works its magic

As of press time on Wednesday, the compression cycle remains, but behind the curtain, network fundamentals are beginning to hint at a resurgence of bullish activity among miners. Bitcoin’s mempool, the bank of unprocessed transactions waiting to be cleared, has all but disappeared, meaning that both fees and transaction times are returning to normal. 

This is thanks to the recent difficulty drop, which was Bitcoin’s largest in nine years. As a result, miners were able to rejoin the network on more profitable terms, incentivizing participation and increasing security as well as network utility.

Bitcoin’s mempool is now back at empty, thanks to difficulty changes. (Photo: Blockchain)

Higher difficulty means more computing power is required to validate blocks on the Bitcoin blockchain. Difficulty adjusts automatically every two weeks to take changes in miner participation into account. Decreases allow more miners to participate in validating transactions, as the cost likewise goes down.

The fact that Bitcoin’s price has not markedly fallen as a trade-off is a notably positive sign, the original increase in unprocessed transactions and fees coming as BTC/USD surged to current levels from under $11,000.

“1 week after difficulty adjustment and #Bitcoin backlog. Last night we went down to only 2,695 transactions in mempool and 1 sat/vb transactions confirming,” Danny Scott, co-founder of UK exchange Coin Corner, summarized on social media Monday.

“Mining hash rate spikes and dips are normal, ‘difficulty adjustment’ handles these.”

The next automatic difficulty readjustment is due in around five days’ time, and is also set to be downwards by an estimated 9%, further levelling the playing field for miners.

Chinese banking first could raise $3 billion in BTC

Beyond Bitcoin itself, institutional interest which began this week with Stanley Druckenmiller continues with a Chinese bank selling bonds worth $3 billion for BTC. Aimed at non-resident investors, China Construction Bank Corporation’s digital bond buys will start as low as $100. The trading venue will be Malaysian exchange Fusang.

“Investors will also be able to trade directly in/out of the bond using BTC,” a press release issued on Wednesday reads. 

“Unlike many other investments available to retail investors, this landmark offering will undoubtedly bring legitimacy and investor confidence to the world of cryptocurrency and decentralised finance (‘DeFi’), which is wrought with lawsuits and concerns surrounding investor protection.”

As Modern Consensus reported, Druckenmiller turned heads when he suddenly told CNBC in an interview that he now both owns Bitcoin and recommends it as an investment. He follows a trail of corporate Bitcoin buy-ins, with particular attention focusing on PayPal with its waiting list of consumers eager to purchase BTC from 2021.

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Anthony Bevan is a journalist focusing on disruptive finance and cryptocurrency, along with the changing face of the market as Bitcoin gains mainstream adoption. Journalists covering cryptocurrency for Modern Consensus May hold positions in some of the currencies they write about.