Bitcoin Marks New Year With Slight Decline; Mining Difficulty Rises for the First Time Since October

Bitcoin’s price edged lower on New Year’s Day, as trading volumes continued to decline in the wake of another failed rally attempt north of $4,000. Bitcoin’s mining difficulty has adjusted higher for the first time in nearly three months as the network’s hash rate stemmed its decline.

Strong Resistance

The bitcoin price has continued lower over the past 24 hours, falling below $3,700 on most major exchanges. At the time of writing, BTC/USD was valued at around $3,690 on Coinbase, Bitstamp and Bittrex. It traded at a $140 premium on Bitfinex, where the price could be seen at $3,834.

Aggregate data courtesy of CoinMarketCap show an average price of $3,735.84, down 1.7% on the day.

Bitcoin’s trading volume has declined sharply since Friday, which marked the last rally attempt for the leading digital currency. Trade volumes surpassed $5.7 billion at the end of last week as prices clawed back above $4,000 briefly. However, volumes have since declined by 28% to $4.2 billion.

While the bulk of trading activity continues to be held on BitMEX, the exchange’s share of total turnover has declined sharply since the height of the selloff in early December. As of Tuesday, BitMEX had processed more than 13% of bitcoin’s exchange-based volume, down from a high of more than 40% during the bear market.

Bitcoin continues to face strong resistance at $4,000, followed by the $4,200-$4,500 region (the latter represents the trading range from the most recent breakout attempt that also faltered).

Mining Difficulty Rises

For the first time since early October, bitcoin’s mining difficulty has adjusted higher, a sign that miners were deploying more hash power into the network. Bitcoin’s mining difficulty rose nearly 3% last week after plunging 31.5% over the previous three-month stretch. As Hacked reported last month, there doesn’t appear to be a comparable drop in mining difficulty over the years, which reflects the severity of the recent bear market trend.

The following chart, courtesy of Blockchain.com, highlights the extent of the recent skid.

At the same time, the network’s hash rate has reversed its decline following a prolonged downtrend (once again, data courtesy of Blockchain.com):

The network’s hash rate increased 35% in December to 43,291,797 TH/s. That’s still well below the August peak of 61,8866,256 TH/s.

Bitcoin’s mining difficulty adjusted lower in the fourth quarter following the sudden collapse in price that triggered a mass exodus from the digital currency space. The combined market cap of all cryptocurrencies fell to a low of around $100.4 billion before staging a recovery in the latter half of December. In the process, millions of bitcoin mining rigs were shut down. Read more courtesy of CCN: Bitcoin Mining Industry ‘Under Considerable Stress,’ 1.3 Million Devices Switched Off.

Since bottoming near $3,100, bitcoin’s price has recovered more than 20%. Bearish pressures are expected to persist for the foreseeable future as investors assess the latest regulatory and institutional developments.

Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.

Featured image courtesy of Shutterstock.

Author:
Chief Editor to Hacked.com and Contributor to CCN.com, Sam Bourgi has spent the past nine years focused on economics, markets and cryptocurrencies. His work has been featured in and cited by some of the world's leading newscasts, including Barron's, CBOE and Forbes. Avid crypto watchers and those with a libertarian persuasion can follow him on twitter at @hsbourgi