Bitcoin News Today: Bitcoin's self-regulating scarcity edges closer to gold's crown

Bitcoin’s network difficulty has reached a new historical peak of 127.6 trillion, reflecting the expanding computational capacity devoted to securing the blockchain. The latest difficulty increase signals a rise in miner participation, with the hashrate continuing to climb despite recent fluctuations in the market. However, a downward adjustment is anticipated on August 9, which is expected to reduce the difficulty by approximately 3%, lowering it to 123.7 trillion, according to data from CoinWarz [1].

The average block time currently stands at 10 minutes and 20 seconds, slightly exceeding the protocol’s target of 10 minutes. This self-regulating mechanism ensures that the time taken to mine new blocks remains stable, regardless of the hashrate. When the hashrate increases, the difficulty also increases to prevent block times from shortening. Conversely, if the hashrate drops, the difficulty decreases to maintain the average block time. This dynamic is essential for preserving the integrity and predictability of Bitcoin’s issuance [1].

Mining difficulty and the hashrate are also critical to maintaining Bitcoin’s stock-to-flow ratio, a key metric used to assess scarcity. The stock-to-flow model, developed by pseudonymous analyst PlanB, measures an asset’s existing supply against the rate at which new supply is introduced. Bitcoin’s stock-to-flow ratio currently stands at approximately 120, significantly higher than gold’s 60, making it, in PlanB’s estimation, “twice as scarce” as the precious metal [1]. This ratio is expected to continue rising following the 2024 halving event, which will reduce the annual supply of new Bitcoin by half, potentially pushing the S2F ratio to 103 [2].

Bitcoin’s scarcity is a core component of its value proposition as a digital store of value. Unlike commodities such as silver, which historically experienced demonetization due to their low stock-to-flow ratios, Bitcoin’s self-adjusting difficulty and fixed supply make it resistant to sudden influxes of new supply that could devalue the asset. This inelasticity to production is one of the attributes that has led many to label Bitcoin as “digital gold” [1].

Despite the growing difficulty and rising scarcity, Bitcoin’s price has faced recent downward pressure. The asset slipped 3% to an intraday low of $112,680 before recovering to $113,375. The return of the Kimchi premium, with South Korea trading at $113,987—0.84% above the global average—suggests heightened local demand or regulatory factors affecting the market. Even with the price pullback, Bitcoin retains a market share of 61.4% [1].

Meanwhile, the mining industry is exploring alternative energy sources to maintain profitability. A UK-based oil company, Union Jack Oil, announced plans to utilize stranded natural gas from its West of Shetland operations to power Bitcoin mining. The initiative aligns with the growing trend of using underutilized fossil fuels to support energy-intensive crypto operations while reducing waste [1].

Source:

[1] title1 (https://cryptorank.io/news/feed/f3e47-bitcoin-mining-difficulty-hits-ath)

[2] title2 (https://newhedge.io/bitcoin/stock-to-flow)