Your favorite trader says Bitcoin (BTC) is at a bottom. At the same time, leading indices and analysts are citing the current price range as a “buying for generations” opportunity. Meanwhile, various crypto and financial media outlets recently reported that bitcoin miners sending a large batch of coins to exchanges are a sign that $17,600 was a capitulation move that cemented the bottom of the market.
There is plenty of confirmation from many anonymous and quoted analysts on Crypto Twitter, yet the price of Bitcoin is still in a clear downtrend, and the metrics don’t fully reflect that traders are buying every pullback.
A crucial element of BTC price that many investors often overlook is the condition and sentiment of bitcoin miners, which is exactly why Cointelegraph had a chat with Rich Ferolo of Blockware Solutions and Will Szamosszegi of Sazmining Inc. To explain what happens in mining. And how this could affect market sentiment in the future.
Cointelegraph: Is the bottom in Bitcoin? The price touched $17,600 nearly two weeks ago and is starting to feel as if the Armageddon box-driven capitulation is over. ideas?
Will Szamosszegi: It is impossible to say whether Bitcoin has bottomed or not. In general, I recommend the dollar cost averaging strategy to people: just buy the amount of bitcoin you feel comfortable with on a consistent schedule. We’ve seen bigger pullbacks than that before – like 93.7% in its early days and 83.4% in 2018. Bitcoin has always made gains over any four-year period in its history.
CT: Currently, Bitcoin is trading at a price below the realized price and below the cost of producing the miners. The price has also fallen below its previous all-time high, as has the hashrate. Chain analysts typically identify these metrics as bottoming out as a generational buying opportunity, but is this true?
Rich Ferrolo: Blockware has done a lot of research on this and we’ve calculated the break-even price of devices going back to the S9 since 2016, at $0.07 per kilowatt, and the break-even at $38,000 for the s9. You will see the old devices exit the network at the end. For s17s, at $0.07 per kilowatt, BTC should be around $18,000.
Modern machines are more efficient, and while the difficulty and hash rate adjustment is trending downwards for current generation machines, anything over 90 terahash (TH/s) can do it. Anything less than 34 watts per shim is ineffective.
One factor to consider is that the value of the machines is declining. Even if the price of BTC starts to rise and there is a symbiotic relationship between the price and the macro factors that influence the price and prices of Bitcoin throughout the broader crypto market.
Machines are solid assets and the biggest aspect of mining is machine. Bitmain and MicroBT are adjusting prices as the price of BTC rises. This is a hard asset that, in a way, is earning a return on a daily basis, in the same way that BTC does.
If you are in the long game, you will not care about the current price of BTC. Just because the price of BTC is going down doesn’t mean that all miners will go down as well. It is more about survival of the fittest. You should be aware of macros, but they are not as bad as one might think. There are different perspectives and positions based on the size of the outfit you’re wearing. Large public companies have a lot of operational factors to consider, but operating costs (OPEX) inflates their total cost even if you get $0.05 per kilowatt. Their model is different from normal miner analytics outside of the general user.
CT: What is the state of the BTC mining industry at the moment? There are rumors that miners using leverage could collapse, inept miners being shut down and equipment selling 50%-65% below 2020 to 2021 prices.
What is happening behind the scenes and how do you see the impact on the industry over the next six months to the year?
RF: I agree with all of your comments. We’re at a price consolidation point right now and the market is cleaning up how much mining debt there is. If you can keep mining and keep going, this can keep your hash rate and difficulty at bay. Blockworks believes that there is an acute shortage of infrastructure in the space. To have an infrastructure, you must have an incredible amount of capital expenditure to get started. There was and still is a lack of infrastructure.
No matter what hardware there is, there isn’t much space for hosting. From the broader point of view, you will experience a lot of surrender, bankruptcy and redundant machines. I know a lot of big players are stopping miners funding. This is a plus for people who want to get into the space, but we expected a 60% increase in hashrate in 2022 when things were booming. And with the advent of s19XPs, the hash rate will go up.
Wafa Sultan: Many industry veterans are accustomed to these cycles in the Bitcoin ecosystem. Historically, you see the hash rate drop after the price does the same. In such a retreat