What’s Happening on the Bitcoin Network Amidst The Red Hot Market?

Miners are reaping the fruits of rising BTC price and fees as blockchain activity continues to ramp up.

Bitcoin continues to smash new record highs, the latest one being $35k and nearly $36k. But this has just started and we have a long way to go.

This ATH came after the market had a 20% pullback on Monday providing a ‘buy the dip’ opportunity. “A large pullback of 20% – 30% should be expected, even in a bull market,” noted Arcane Research.

And this drop has been the result of sky-high funding rates and of course an overly confident market that led to $1.2b worth of longs getting liquidated in the BTC futures market — by far the largest daily liquidation since BTC started moving a few months ago.

After normalizing, these funding rates have started rising back up already.

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What’s just as interesting is the activity the largest crypto network has been seeing.

This price action has actually been on the back of the strong volume. Leading spot exchanges crushed all the previous records by having three days with over $10 billion in volume.

“$80+ billion in trading volume in the last 24 hrs on Binance. ATH x 2!” resulting in scaling issues, noted the CEO of leading spot exchange, Changpeng Zhao.

In terms of blockchain activity, Bitcoin active addresses grew by 9.3% week-over-week to start 2021, averaging over 1.1 million per day. These addresses are actually near all-time highs.

On January 3rd, the 7-day average reached 1.15 million, just shy of the all-time high of 1.18 million set in December 2017. The number of hourly active addresses (24h MA) actually just hit a new ATH.

Network security continues to look strong as well with the hash rate growing by 11.7%, again reaching for a new all-time high.

Bitcoin miners are currently enjoying revenue of $33 million per day, as per data source Glassnode. This has been thanks to the rising BTC prices and the average Bitcoin fees that have yet again surged to $11, moving up since Dec. 13.

Between the last halving and October, the average daily revenue was at around $10 million. It has only been within 5 weeks in late 2017 that this number has been higher.

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Author: AnTy

Bitcoin Funds Attracted $4B in Inflows in 2020, CoinShares AUM Surges to $15B

Digital asset manager CoinShares saw its assets under management (AUM) rising to an all-time peak of $15 billion, which were standing at just $2.57 billion at the end of 2019.

This surge is the result of institutional investors pumping the second-highest amount on record, $429 million, into the company’s crypto funds, for the week ending Dec. 7.

Grayscale’s assets under management have risen to over $12.4 billion by amassing inflows of $4.3 billion this year. Just last week, the world’s largest crypto fund had more than $336 million in inflows.

“On an anecdotal level, based on our client conversations over the course of 2020, we have seen a decisive shift from enquiries of a speculative nature to those that begin with comments such as, ‘bitcoin is here to stay, please help us understand it,’” said James Butterfill, investment strategist at CoinShares.

“Given the levels of interest, this suggests we are only on the cusp of institutional adoption rather than it cooling down,” he added.

Weekly-Crypto-Asset-Flows-by-Institution

Source: CoinShares

The second-largest cryptocurrency Ethereum also saw inflows of US$87m, representing 20% of total inflows, far greater than its current share of 14%.

Bitcoin-focused funds attracted inflows of $334.7 million last week, bringing the total inflows so far this year to nearly $4 billion.

In contrast to this growth, gold experienced outflows of a record $9.2 billion over the last four weeks from its investment products, while bitcoin saw inflows totaling $1.4 billion during the same period, as per CoinShares latest report.

However, inflows into gold products were higher in the entire year at $45.7 billion.

The CoinShares report attributes these gains to the weak US dollar, which highlighted the fears of excessive monetary policy, combined with worries over management of the COVID crisis.

This is a period when gold should outperform; as such, the report believes, “investors are choosing to allocate to Bitcoin to help diversify the limited-supply asset component of their portfolios.”

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Author: AnTy

Bitcoin in For Another Bull Cycle as BTC Supply Continues to Get Eaten Up Like Never Before

Over the weekend, the price of Bitcoin started rising and is currently trading above $11,650.

Interestingly, it has been three months, 93 days exactly, since Bitcoin was founded in 2009, that it has spent above the current price of $11.5k.

More importantly, it’s the first time that bitcoin has been above $10,000 with realized volatility extremely low, as per Skew.

While trading in the green, the ‘real’ amount of the BTC traded in the past 24 hours has fallen drastically to just over $700 million.

This lack of volume could be on one side due to the lack of price action in the market and the weekend. On the other hand, the BTC balance on exchanges is on a constant decline. An analyst noted,

“More and more Bitcoin getting out from exchanges and most probably being transferred to non-custodial wallets. This suggests slightly lower liquidity and lower selling pressure going forward.”

BTC Balance on Exchanges
Source: Glassnode

According to Chain.info, in the past 24 hours, the biggest outflow of BTC has been recorded on OKEx of 6,269.

Last week, the exchange suspended all digital currency withdrawals after one of its key holders who has been helping the authorities in an investigation was unreachable.

Additionally, as per Coin Dormancy, a measure of “old hands selling out,” which usually sold the tops have been acting differently in the current cycle. “They sold the bitcoin bottom at $3-$4k, they are selling right now,” observed on-chain analyst Willy Woo.

Coin-Dormancy
Source: Glassnode

Another Bull Cycle in the Making

While Bitcoin continues to move out of exchanges in favor of cold wallet storage, for the first time, public companies are gobbling up more and more BTC by making it part of their Treasury. Grayscale, yet again, for the third time in a row, had a record inflow in Bitcoin.

According to Grayscale’s Q3 report, they bought 77% of all the BTC mined in the quarter, up from 70% in Q2 and 27% in Q1. Dan Tapiero, co-founder of 10T Holdings said,

“SHORTAGES of Bitcoin possible. Barry’s Grayscale trust is eating up BTC like there is no tomorrow. If 77% of all newly mined turns into 110%, it’s lights out. Non-miner supply will get held off mkt in squeeze. Shorts will be dead. Price can go to any number.”

Overall, the market is bullish on digital assets, as Pantera Capital wrote in its last week’s investor letter; besides the network fundamentals, all the money printing the Federal Reserve and other central banks are doing works in bitcoin’s favor.

“We strongly believe we are in the early stages of a large bull market fueled by both a powerful global macro tide and growing fundamentals in the underlying technology.”

Major Bitcoin Price Cycles
Source: Pantera Capital

In its decade long life, Bitcoin has gone through three major prices already and seems to be primed for yet another one.

“My intuition from trading waves for 35 years is we’re in for another one,” wrote Dan Pantera, adding, “it’s still a massive hype cycle roller coaster.”

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Author: AnTy

Filecoin Is Currently Testing EIP 1559, A Proposal to Restructure Ethereum’s Gas Fees

The issue of rising gas costs on Ethereum might soon come to an end, should an Ethereum Improvement Proposal (EIP) currently being tested on the Filecoin network go through. Dubbed ‘EIP 1559’, this proposal is among those that have been suggested to reduce Ethereum’s network fees.

Announcing the development on Twitter, Ethereum’s founder Vitalik Buterin, highlighted that the solution seems to be working well on Filecoin,

“In case you missed it: recent writing on fee market reform (EIP 1559) …. Oh and it seems to be working great on Filecoin:”

Notably, Filecoin, which is a decentralized storage network, shares fundamentals with Ethereum hence the compatibility of innovations within both ecosystems. The project is, however, still in its early stages and is set to launch a Mainnet in September as per the latest Filecoin progress update.

The EIP 1559 Proposed Network Fee Solution

With activity rising in DeFi, Ethereum’s network continues to suffer congestion problems to an extent where profits end up being eaten up by transaction costs. The suggestions to work on these shortcomings gained momentum back in 2019 but have now become more critical than ever for Ethereum’s survival in the blockchain space.

Well, ETH-oriented developers seem to be catching up and could soon solve the rising gas cost problem. The EIP 1559 proposal, in particular, suggests the use of a ‘base fee’ for dynamic fee adjustments on Ethereum’s network. Ideally, this approach will constrain gas fee increments by altering the current calculation of gas fee on Ethereum.

The proposal introduces an automatically increasing base fee if the network is more than 50% utilized while decreasing the same if it is below 50%. In doing so, ETH users still have an option to get ahead of the queue by paying a tip in addition to the base fee. These funds will then be delivered to miners while the ETH used for paying the base fee is burnt.

Filecoin Marking Milestones!

As EIP 1159 makes progress, the Filecoin testnet in totality is also marking milestones as its native ‘FIL’ token launch approaches. The project recently incentivized developers to stress test its network under the ‘Filecoin Space Race’ program,

“Compete and collaborate at the same time. The top 50 miners in each region and the top 100 globally are eligible for rewards. The greater the total storage power, the bigger the total prize pool.”

This incentivized testnet has since recorded around 22 petabytes in total raw byte storage power with contribution from 295 miners. Going by the International Electrotechnical Commission 1998 metrics, this data can roughly be compared to 12,500 two-hour-long films.

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Author: Edwin Munyui

Gold Beating Bitcoin for Over 2 Months Now; A New ATH for Bullion is Imminent

Precious metals are enjoying the gains with gold rising 1.23% today to reach $1,840 per ounce today although it is Silver which has been stealing the show by having its highest finish since 2016.

XAU/USD chart
Source: TradingView XAU/USD

With the government and central banks releasing excessive stimulus, the new normal is benefiting the metals just as much as it is stocks which have been rallying hard throughout 2020.

The expectation for even more stimulus and lower interest rates amidst the rising debt and increasing coronavirus infections, slow economic recovery, and US-China tensions have prompted investors to keep buying the yellow metal.

“I wouldn’t be surprised to see gold test the all-time highs set in 2011 at around $1,900 per ounce,” said Thomas Taw, head of APAC iShares investment strategy at BlackRock previously.

With rates at virtually zero, gold and the likes of bitcoin becomes far more attractive when the real yield on alternative investment becomes negative.

Also, a meeting of European Union leaders in Brussels is also in agreement on a huge spending program of €1.82 trillion (over $2 trillion USD) while US lawmakers are set to start talks over an additional coronavirus aid bill.

All the money central banks are pumping in the market means further currency debasement which should help gold “profit as a store of value” and of course Bitcoin.

However, for now, gold is stealing the thunder with bitcoin down 6% since May 7th when the market topped at just above $10,000. Also, billionaire investor Paul Tudor Jones announced his fund was buying the digital asset calling Bitcoin the “fastest horse” and an inflation hedge while gold has jumped 7.5% during the same period.

While bullion has been enjoying all the bullish factors, bitcoin has been stuck in a rut all this time after surging to $10,000 in the aftermath of the March sell-off. The range bitcoin has been trading has been getting tighter and tighter, one month price range has been actually at an all-time low, with volatility declining as well.

Today, however, after a long time, bitcoin is making some moves, rising above $9,400 with ‘real’ trading volume also increasing albeit slowly to $1.3 billion.

Meanwhile, Citigroup analysts say gold hitting a new all-time high is “only a matter of time.” The yellow metal is already up 20.5% YTD.

The precious metal has already posted fresh records in G-10 and major emerging market currency this year. Gold is expected to climb to a new ATH in the six-to-nine months with a 30% probability that it’ll top $2,000 an ounce in the next three-to-five months. Last month, Bank of America made even a higher top prediction at $3,000 per ounce.

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Author: AnTy

SPX Strikes Again & Takes Down Bitcoin with it

The price of Bitcoin fell to $9,050 after rising to nearly $9,500 this week. Currently, the leading digital asset is trading around $9,175, down 2.54%, with about $1.16 billion in ‘real’ trading volume.

According to IntoTheBlock’s In/Out of the Money Around Price (IOMAP) indicator, more than 2.2 million addresses previously purchased 1.43 million BTC in the $9,172 and $9,442 range, as such it is “a critical resistance level as several of these addresses will attempt to break-even on their positions.”

The losses came after the S&P 500 fell on Thursday as investors fear a smooth reopening from the coronavirus shutdowns may not be happening.

One month correlation of SPX and bitcoin is currently at 68.5%, slightly down from the all-time high of 78.8% on July 8th, 2020.

Tech Stocks Still Leading the Rally

Data showed that initial unemployment claims in the US remain elevated while the number of confirmed new Covid-19 cases in the country hit a new single-day high the day before.

Eric Rosengren, the president of the Federal Reserve Bank of Boston, fears that the community spread in many areas of the US will continue to be the problem for the economy.

In light of this, the broad US stock index pulled back, S&P 500 dropped 0.56%, and the Dow Jones Average 1.39%. The tech sector, however, is still roaring ahead with Amazon in the lead.

“Much stems from tech’s new role as a utility — something consumers and businesses simply can’t live without,” wrote Lei Qiu, a fund manager overseeing tech stocks at AllianceBernstein. “These necessities have become even greater as the pandemic increased the need for remote shopping, learning, and working.”

But even gold moved in the same direction as of stocks and pulled back from the new nine-year peak but is still above $1,800.

Meanwhile, the US dollar, which struggled with China’s yuan climbing to a four-month peak as investors poured into Chinese stocks which had been rallying for eight straight days, rebounded.

More Free Money Coming!

On Thursday, Treasury Secretary Steven Mnuchin supported the second round of stimulus checks, which could come as soon as by the end of this month.

“We do support another round of economic impact payments,” said Mnuchin in an interview with CNBC.

This second round of checks would come after $1,200 were given to most of the Americans as part of the $2 trillion rescue package in March.

US House of Representative Speaker Nancy Pelosi also said the same day that the coronavirus relief legislation needs another $1 trillion to aid state and local government and $1 trillion for unemployment payments and direct payments.

The White House also back an extension of the Paycheck Protect Program (PPP) loans for small business but wants them to be “much, much more targeted” than the previous one, Mnuchin said.

In the same line, Federal Reserve Bank of Atlanta President Raphael Bostic feels the US economy warrants more action by the central bank.

Meanwhile, the Fed has wound down its unprecedented 10-month intervention in short-term borrowing markets. Some say it is “important” because it signals a return to normality in the repo market.

With so much support for the new stimulus, the chances are it is coming, and with that, the Fed’s army of Robinhood traders will pump up the stock market. This may even bring some action in bitcoin as well, given its correlation with the equities market that remains high.

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Author: AnTy

Raging Protests Across America Historically Bodes Well for Stocks; What About Bitcoin?

Coronavirus cases in the US are slowing down, rising by the slowest pace of 1.1% in five days after over 1.8 million reported cases and more than 106,208 deaths so far.

“Market upside ultimately depends on the path of the virus and the success of reopening,” wrote Credit Suisse Chief U.S. Equity Strategist Jonathan Golub on Monday.

The stock market opened higher only for Dow Jones to then drop by 0.38% along with the S&P 500 (currently above 3,000) and Nasdaq by 0.38% and 0.29% respectively.

When it comes to reopening the opening, Chicago which is hit hard by violent protests over a police custody death may delay its reopening.

Grappling with protests and cold war with China

The death of an African American at the hands of the police in the United States has set off mass protests against police brutality.

A chorus of criticism has erupted in many parts of the world alongside the unrest in the US over the death of 46-year old George Floyd last week.

Chinese officials and state media seized this news to compare these protests to the pro-democracy movement in Hong Kong, accusing Washington of hypocrisy.

Beijing repeatedly blamed “foreign forces” for inciting and diving Hong Kong protests.

The US administration has been vocal in support of Hong Kong’s pro-democracy movement. In response, Lijian Zhao the foreign ministry spokesman on Monday urged the US to protect the lawful rights of the minority and eliminate racial discrimination.

“US House Speaker Nancy Pelosi once called the violent protests in Hong Kong ‘a beautiful sight to behold.’… US politicians now can enjoy this sight from their own windows,” wrote Hu Xijin, editor-in-chief of nationalist tabloid Global Times.

Zhao also threatened with “counter-attacks” on the US for reversing Hong Kong’s special custom status.

This house of cards will come toppling down very soon

The stock market enters June on a higher trend despite multiple challenges ahead. S&P 500 rallied over 36% off its March 23 low despite a global pandemic, political and civil unrest, and economic and earnings downturn. Art Hogan of National Securities noted,

“At the levels we’re at, I wouldn’t be surprised to see the market take a pause and pull back.”

“We can say we’re slowly reopening and there’s going to be economic activity but it’s hard to defend valuations with so much unrest that we’re seeing going on in this country this weekend.”

But others believe protest won’t materially impact markets which is historically correct. As a matter of fact, stocks have risen while riots flared up. For the riots to have a major impact, there needs to be an expectation of long-lasting riots “otherwise they are noise as far as asset prices go.” Analyst Mati Greenspan said,

“Already hearing analysts with bated breath getting excited about buying stocks now because the #GeorgeFloyd protests will unleash additional monetary stimulus from the FederalReserve.”

“This house of cards will come toppling down very soon.”

According to Goldman Sachs analysts as well, the “remarkable journey” of US stocks is likely to stop, with its year-end target at 3,000, because of “numerous medical, economic and political risks dot the investment landscape.”

What about Bitcoin?

The world’s leading digital currency is trading around $9,550, up 0.80%. May marked the “highest monthly close on BTC in over 7 months.” So far, in 2020 BTC/USD is up 30.58% and nearly 50% in Q2 of 2020.

However, the June 1 candle has opened into resistance and it needs to “confirm itself above this structure” otherwise be ready for rejection and risk distribution.

If the stock market takes a hard hit, bitcoin could also be in danger of some extent of sell-off.

Historically, however, April, May, and June have been good months for bitcoin price performance which combined with investors preferring to hold their coins, institutional investors flocking to the digital currency and Federal Reserve’s balance sheet surpassing $7.09 trillion for the week ending in May 20 works in favor of bitcoin.

In the current global backdrop of social unrest, bitcoin — a decentralized, deflationary asset that is censorship-resistant and unseizable offers a great alternative.

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Author: AnTy

Crypto Payment Processor BitPay Sees More Use in Stablecoins than Layer-2 Solutions

  • Rising fees on the Bitcoin blockchain after the halving will not set BitPay, a crypto payments startup, into using layer 2 payment channels such as the Lightning Network or Liquid Bitcoin.

Bill Zielke, BitPay’s Chief Marketing Officer, revealed on Thursday this week that the company was not planning to integrate the layer 2 Bitcoin channels. Bill explains that Bitcoin transactions dominate the customers’ preference hence no rush to switch despite the fees reaching highs of $7 after a 256% spike earlier in the month.

The company switched from being a Bitcoin-only payment service, where merchants can accept crypto and convert it directly into fiat currency options including the dollar, euro, and British pound. Users can currently pay across selected merchant stores in North America and Europe using multiple cryptocurrencies including Bitcoin Cash (BCH), XRP, Ethereum (ETH), and stable coins including Binance dollar (BUSD) this April.

According to Zielke, Bitcoin currently holds over 95% of all the transactions on the platform with BCH coming in second with about 2% of the total volume transacted. Despite the skyrocketing Bitcoin fees since the halving, the BitPay’s CMO says the company will not be switching to Lightning Network and other Layer 2 solutions due to unsystematic risks they pose. He said,

“Lightning Network and the Liquid sidechain are not in our current plans or roadmap but we are always evaluating new and innovative alternatives and collecting customer input on use cases, importance, and priority.”

The current lockdown state across countries due to the COVID-19 virus is seeing more people spend time online shopping and BitPay aims to increase the use of crypto in day to day spending. Stablecoins have witnessed impressive growth in the first half of 2020 and the lack of volatility on these assets makes them ideal for spending.

Bill said the company is focusing on the stablecoin market following the addition of several stablecoins on the platform this year including PAX, BUSD, USDC, and GUSD.

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Author: Lujan Odera

A Perfect Storm for Bitcoin Combined with the Price Action seen at the Start of Last Bull Run

Another volatile week is past us but this time the prices were rising. Bitcoin is trading around $7,550 while Ether is particularly looking strong, just inches away from $200. Overall the market added $10 billion this week.

The gains have resulted in BItcoin moving back to the level seen before the dump on March 12, the year-to-date returns have also turned positive. Bitcoin is about to print its sixth straight weekly green candle, something not seen since 2019 which was the start of the bull run.

Although the current level is showing strong resistance, bulls seem to be in control for now. This level acted as support in June and September last year but struggled here for about 7 weeks in Nov-Dec.

According to Arcane research, a weekly close above $7,700 would signal a “strong case for the bulls,” while bears are looking for a close below this level and the first red weekly candle since the market crash.

The network meanwhile is healthy with the number of active entities spiking to the level not seen since the price top in 2019. The level of demand on the Bitcoin network, however, dropped further over the last week.

A moment in the spotlight for Bitcoin

With the world still in turmoil, volatility going forward is likely and caution is warranted though over the past couple of months exchange volumes and real transaction volumes have increased significantly, noted Marco Santori who joined crypto exchange Kraken amidst this turmoil.

According to him, the implementation of modern monetary theory around the world spurred by the pandemic had made people pay attention to Bitcoin as an alternative to the unprecedented printing of fiat government money.

“It’s something of a perfect storm for Bitcoin right now,” he said. Although there are thousands of other cryptos out there, “this is really a moment in the spotlight for Bitcoin in particular as an asset whose supply is fixed and reliable and not subject to political whims.”

Also, zero and negative interest rate is another argument for crypto which lowers the appeal of holding traditional fiat currency and reduces the opportunity cost of holding a non-income generating asset.

Scarce goods will come off as the big winners

All of this is happening just a few days ahead of having that will cut down miner inflow from 1800 BTC per day to 900 BTC per day.

But this will be the third time that lower supply than before will enter the market. Because it isn’t new information, from an efficient market perspective, this information is priced in but because this event will reinforce bitcoin’s “value proposition as a scarce asset,” in a world where the money supply is being increased dramatically it will attract new investors to bitcoin.

“As we’ve been moving closer to the halving, of course global markets are in a state of flux, but overall BTC’s resilience has persisted,” said Ryan Rabaglia, head of trading at Hong Kong-based digital asset platform, OSL.

The macro backdrop is most favorable to bitcoin right now, and how the massive amounts of money central banks are printing around the world to fight off the economic effects of COVID-19 would affect the market.

“There’s a big possibility that scarce goods (stocks, gold, bitcoin) will come off as the big winners in this massive QE experiment we’re seeing play out minute by minute,” said Daniel Vogel, CEO of Bitso, Mexico’s first cryptocurrency exchange.

But as per him, not just bitcoin but altcoins will also see price appreciation, as they usually do “without any real technological or logical reasons.”

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Author: AnTy

How will Bitcoin Halving Affect Miners’ Profitability

  • To maintain healthy profit margins for miners, a rising hashrate is needed while newer and more efficient mining devices to reduce mining costs
  • Before halving the gross cost to mine one BTC is $6,851 and after halving $15,062 and much lower for large scale commercial mining pools like Bitmain

Bitcoin reward halving is less than 100 days away, scheduled to occur in Mid 2020 that would see the new issuance supply of bitcoin declined by 50%. With this supply reduction, there would be changes in the breakeven cost to mine bitcoin before and after the halving.

Digital currency research company TradeBlock tries to find “bitcoin mining profitability following ‘The Halving’ and its indication for price in its latest blog.

Maintaining healthy Profit Margins & Reducing Mining Cost

In 2019, commercial mining operators were operating at “healthy profit margins,” as the price of BTC jumped throughout the year.

The network hashrate meanwhile, continued on its record run, making new highs each week as the number of resources committed to secure the network rises. But as the resources rise over time, efficiency and mining costs rise as well.

To maintain healthy profit margins for miners, a rising hashrate is needed to correspond with a rising bitcoin price while to reduce mining costs, newer and more efficient mining devices are continuously being developed.

Miners expecting the price of bitcoin to rise to higher levels?

The decentralized peer-to-peer network is secured by miners who receive 12.5 bitcoin for mining each block. Currently, 144 blocks are mined on average per day that results in 1,800 new BTC per day. After the halving, the mining reward will decline to 6.35 bitcoin per block, resulting in 900 new bitcoins mined per day.

Before the halving, the gross cost to mine one BTC at current levels with current device types are estimated by TradeBlock at $6,851. Meanwhile, the BTC price is trading at $9,800.

After the halving, assuming the hashrate will continue to rise over the next three months at the same rate it has been for the past three months and commercial operators transition to newer models for 30% of their rigs, the cost to mine one BTC would be $15,062.

If instead of rising to ~135,882,500 TH/s on halving day, the hashrate remains flat, the cost would fall to $12,525. However, for large scale commercial mining pools like those operated by Bitmain, the largest manufacturer of mining rigs, will have even lower breakeven cost.

The breakeven costs, TradeBlock says indicates miners continue to increase towards which suggests miners are “likely expecting the price of bitcoin to rise to higher levels,” above $12,000-$15,000 around the halving to continue to generate a profit. In contrast, it is also likely they will reduce resources following the halving that will result in a decline in hashrate as profitability falls.

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Author: AnTy