Bitcoin’s Mining Difficulty Rises Despite Market Drop—What Does It Mean?

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Bitcoin is beginning to show signs of a potential reversal after experiencing a prolonged bearish trend. Although the cryptocurrency remains below $85,000, it has recorded a 2.6% increase, with its price currently at $83,510.

Despite this short-term uptick, Bitcoin is still down by roughly 7.5% over the past week, reflecting a continued downtrend. Regardless of Bitcoin’s price struggles to regain higher levels, CryptoQuant analyst Avocado Onchain has identified a notable trend in BTC mining activity.

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Rising Bitcoin Mining Difficulty and Miner Holding Strategy

According to Avocado Onchain, Bitcoin’s mining difficulty has remained in an uptrend even as the market undergoes a 30% correction. The analyst wrote:

During the extended correction phase that began in March 2024, mining difficulty saw a temporary drop, leading some to speculate that it resembled the end of the 2021 cycle. However, contrary to those predictions, Bitcoin’s price rebounded sharply. Although it is now undergoing a ~30% correction, mining difficulty continues to climb.

Historically, a decline in mining difficulty has been associated with miners shutting down less efficient rigs, which often signals broader market distress.

Bitcoin mining difficulty. | Source: CryptoQuantHowever, current data, according to Avocado suggests that miners have not yet begun offloading large amounts of Bitcoin, indicating that they are holding onto their reserves rather than selling at lower prices.

Another key metric Avocado pointed out is the Miner Position Index (MPI). Previously, this metric showed signs of selling pressure in November 2024. However, this activity did not lead to a significant market downturn, according to the CryptoQuant analyst.

Instead, miners appear to be maintaining a holding strategy, suggesting that the broader uptrend remains intact. If Bitcoin’s correction extends further, a decrease in mining difficulty could be a potential indicator of miner capitulation, but as of now, the network remains resilient.

Stablecoin Transfers and Market Absorption

In a separate analysis, CryptoQuant analyst Mignolet has observed a surge in the total amount of stablecoin transfers, a trend that typically does not occur while Bitcoin’s price is declining but rather after a drop, during a market consolidation phase.

This suggests that large-scale investors could be absorbing market shocks through over-the-counter (OTC) transactions, reducing the impact of further price declines.

Stablecoin transfers and active addresses. | Source: CryptoQuantMignolet also noted that increased activity in stablecoin transfers, combined with a rise in active Bitcoin addresses, signals heightened network participation. This pattern has historically indicated spot accumulation, which can serve as a precursor to price recoveries.

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If accumulation continues while sentiment remains low, the market could enter a phase where a short squeeze forces a rapid upward price movement in Bitcoin.

BTC price is moving downwards on the 2-hour chart. Source: BTC/USDT on TradingView.comFeatured image created with DALL-E, Chart from TradingView