The past few weeks have undoubtedly been rough for crypto; from the February highs, Bitcoin has fallen 36%, reaching a low of $3,800 in March.Robert Kiyosaki, the author of the popular financial book “Rich Dad Poor Dad,” sees no reason to fear, though. In fact, the well-known investor recently went as far as to say that it’s time to drop dollars for Bitcoin and other hard money.Related Reading: Last Time This Signal Flashed, Crypto Rallied By 50%. It’s Back AgainSell Dollars, Buy Bitcoin: Robert KiyosakiIn a recent tweet, Kiyosaki explained that with the Fed “counterfeiting […] trillions of fake dollars – $82 billion a month to $125 billion a day” and interest rates at 0%, it makes sense to save “gold, god’s money, or Bitcoin, people’s money,” rather than the fiat dollars that don’t yield anything and are being constantly debased.He added in a later tweet that the dollar is likely “dying,” boosting the case to invest in gold, silver, and Bitcoin.DEATH OF DOLLAR. People desperate for money. Very sad. If government gives you free money take it yet spend it wisely. DO NOT SAVE. Buy gold, silver, Bitcoin. Dollar is dying. Silver $20. Best Buy for future security. Everyone can afford $20, especially with free fake money.— therealkiyosaki (@theRealKiyosaki) April 4, 2020Demand Is BoomingIt should come as no surprise, then, that demand for Bitcoin is booming.Leading cryptocurrency exchange Coinbase reported that during the now-infamous “Black Thursday” crash, the exchange saw a dramatic surge in buying interest for cryptocurrency:“But beyond just a rush, two things are clear: customers of our retail brokerage were buyers during the drop, and Bitcoin was the clear favorite. Our customers typically buy 60% more than they sell but during the crash this jumped to 67%, taking advantage of market troughs and representing strong demand for crypto assets even during extreme volatility.”The U.S.-based Kraken corroborated this narrative, writing in a recent tweet that the exchange “recorded an 83% rise in sign ups, and a 300% increase in verifications” over the past few weeks.Also, per previous reports from NewsBTC, according to data from blockchain analytics company Coin Metrics, the value of all U.S. dollar stablecoins (USDT, Binance USD, USD Coin, etc.) is on the verge of passing $8 billion — a metric up by 20% in the past month in itself.CM has added Huobi dollars (HUSD) and Binance dollars (BUSD) to their community data. Stablecoin supply in the sample is just shy of $8b collectively. My guess is it passes that threshold tomorrow. https://t.co/aEOeZIpiDk pic.twitter.com/B9WPd1mbsM— nic carter (@nic__carter) March 29, 2020As to why this is bullish, Su Zhu, CEO of Three Arrows Capital, summed it up nicely in 2019 when he wrote that with so much money sitting on the sidelines, especially in stablecoins, BTC could appreciate rapidly:“Theres an estimated $2B in cash sitting at crypto funds/holdcos. Theres another $2B+ sitting in stablecoins, and another $2B sitting at exchanges/silvergate/signature. This is $6B fiat already onboarded to crypto to buy your bags. Imagine thinking we need new money to hit $10k.”Featured Image from ShutterstockSource
Bitcoin.com, one of the firms championing the cause of Bitcoin Cash, seems to be going through a bit of a tough time. With the Bitcoin Cash halving less than a week away and the difficulty that global markets are experiencing, the firm has now reportedly fired half of its entire workforce.
Miners Abandoning the BCH Network
Per reports, Bitcoin Cash has taken a significant hit in the past few weeks, as miners on the network seem to be migrating to Bitcoin in the hopes that the halving brings an increase to the asset’s value. Candor, a professional networking service in the tech space, provided a list of companies in the space that have stopped hiring, and as the firm found, Bitcoin.com has trimmed its staff by 50 percent.
Of course, it’s worth noting that Bitcoin.com isn’t the only firm in the space that has made some changes to its staff count. As Candor notes, Bitfury, a full-service blockchain solutions provider, has also imposed some cuts to its staff, while digital asset manufacturer Ripple Labs has also stopped hiring for the time being.
Bitcoin Cash is more extensive than Bitcoin.com, of course. However, given that the company is so instrumental to the asset and Bitcoin.com doesn’t appear to be doing so well, the future doesn’t look so bright for the asset too. A halving is usually a monumental event in the life cycle of any digital asset, but it’s anyone’s guess what could happen at this time.
Bitcoin Cash’s Slow Death?
The threats to Bitcoin Cash have been quite extensive – especially this year. In February, an investor reportedly called Josh Jones, the founder of web hosting service Dreamhost – announced on Reddit that an attacker had stolen 1,500 BCH tokens from his wallet, worth almost $15 million at the time.
As the investor explained, the hack came when his SIM was compromised. While he didn’t confirm whether the attack was due to a SIM swap, he did appeal to miners not to validate the transactions.
“It’s only had three confirmations, if any miners/the community can help somehow, I’ve got the private keys. Help help help.. Big reward obviously,” the investor added in his post.
Commenting on the event, Dovey Wan, the founder of blockchain investment fund Primitive Ventures, warned that the ripple effect of this hack would go beyond just the singular investor. In a series of tweets, she explained that the investor had been careless for keeping so much in crypto in a single account, adding that the hack was a “simply brutal” one.
However, her warnings also extended to Bitcoin Cash and the entire network. She added that the attacker seemed to be splitting the funds, thus hiding their identity and making it easier for them to sell on exchanges.
“RIP BCH .. only a double-spent can help this poor guy now,” she wrote, adding that the incident, as well as internal conflicts between major network operators, could spell the asset’s slow death.
Depending on where you are in the world, you may be on week four, eight, or even thirteen of coronavirus quarantine; while video conferencing in pajama pants may be starting to feel a bit more normal, the world is keenly aware that the full effects and implications of the quarantine have not yet been felt, and will not be fully realized for months–or even years–to come.
Just as in much of the financial world, this is particularly true in the cryptocurrency sector. Every week–and, at times, every day–there is a new revelation of the effects of the spread of COVID-19 on various parts of the nascent industry.
while massive fluctuations in crypto markets are perhaps the most visible part of these effects, there are many other consequences that are somewhat overlooked–namely, the effects of coronavirus on the cryptocurrency mining industry.
Why is hash rate important?
This has been evidenced by major fluctuations in the “hash rate” of the Bitcoin network, which measures the amount of computing power that is being devoted to perform “mining” duties.
On the Bitcoin network, “mining” is the process by which transactions are confirmed–computers are chosen by the network solve complex cryptographic equations, which results in transactions being added to the ledger. In exchange for their work, these computers are rewarded with Bitcoins.
The hash rate is an important indicator of the Bitcoin network’s health: essentially, the greater the hash rate, the more secure the blockchain is; a higher hash rate means that it is more difficult for hackers to successfully alter the blockchain. A higher hash rate can also mean that transactions sent through the network are validated more quickly.
Alex Batlin, ex-Blockchain Lead at BNY Mellon and current chief executive of custodial wallet specialist Trustology.
Therefore, a lower hash rate means slower transaction times: “if we look at this from a short term perspective, it is inconvenient as creating the block now takes longer as a result,” said Alex Batlin, ex-Blockchain Lead at BNY Mellon and current chief executive of custodial wallet specialist Trustology, to Finance Magnates. “Suddenly, blocks that could be mined in 10 minutes now take 20-30 minutes, causing massive issues for the blockchain.”
Additionally, some cryptocurrency analysts also believe that hash rate is an indicator of Bitcoin’s price–that, though it may take several months, an increase in hash rate is an eventual indicator of an increase in price, and vice versa.
— Max Keiser, tweet poet. (@maxkeiser) August 8, 2018
The spread of the coronavirus is already being blamed in part for a steep dive in the Bitcoin network’s hash rate that took place throughout the month of March; the BTC hash rate reached its highest rate this year at 150 EH/s on March 5th before plummeting to 105.6 EH/s by March 15th, just 10 days later–a 29 percent drop.
Then, on March 26th, the drop continued; i the hash rate dove as much as an additional 15.95 percent, resulting in a 45 percent decline since the peak in January. It has since shown some signs of recovery, but has not neared its higher levels earlier in the month.
Practical concers: quarantine requirements, supply chain disruptions, and non-essential business designations
The decline is, in part, being attributed to the spread of the coronavirus.
Case in point: a 10-K report that was was filed with the United States Securities and Exchange Commission late last month, Riot Blockchain, a cryptocurrency mining firm based in Castle Rock, Colorado, laid out several scenarios in which fallout from the coronavirus–which has already begun to affect some of the company’s operations–could seriously impair its business.
This is for several reasons: first, quarantined employees cannot perform all of the necessary duties to maintain business-as-usual: “[…] we have experienced and will experience disruptions to our business operations resulting from quarantines, self-isolations, or other movement and restrictions on the ability of our employees to perform their jobs,” the report said.
The firm also pointed to possible issues with its supply chain: “China has also limited the shipment of products in and out of its borders, which could negatively impact our ability to receive mining equipment from our China-based suppliers,” he said.
Finally, Riot Blockchain said that because “we have not been classified as an essential business in the jurisdictions that have decided that issue to date,” there is a possibility that “we may not be allowed to access our mine or offices.”
All of this could result in shutdowns: “if we are unable to effectively service our miners, our ability to mine bitcoin will be adversely affected as miners go offline, which would have an adverse effect on our business and the results of our operations.”
BTC’s price movements may be the most significant factor attributing to the decline in hash power
Riot Blockchain’s 10-K report scenario is largely hypothetical, but there have been reports from other participants in the mining industry who have said that their operations have been impaired by the spread of the coronavirus–this is particularly true for miners in China, which is still home to the majority of Bitcoin’s hash power.
Indeed, in early February, PandaMiner, a mining firm based in China, told CoinDesk that quarantine controls had caused disruptions in business as usual: Abe Yang, the company’s chief executive, said that “not only us, [but] most miner makers have been affected by the outbreak since their factories are based in cities like Dongguan and Shenzhen in Guangdong province.”
But quarantined workers and possible disruption in mining supply chains are not the only corona-related reasons that miners may be shutting off their equipment.
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Indeed, the price fallout from the Bitcoin network that has ensued as part of the widespread economic fallout over the last several weeks may have also caused a slowdown in mining: some of the decline in hash rate can be attributed to the possibility that larger mining rigs are also programmed to shut off once the price of Bitcoin passes through set lower limits, and return to full functionality once the price of Bitcoin recovers to a certain level.
However, while these programmatic price limits may have been responsible for some of the decline in hash rate throughout March, it doesn’t seem as March 26th’s hash rate drop was related to any price event on the Bitcoin network–the price hovered around $6600 throughout the day, up from a monthly low of approximately $4200 the week prior.
Smaller mining operations may be forced to shut down
However, the price movements in Bitcoin may have more dire implications for smaller- and medium-sized mining operations, who may have been forced to temporarily (or even permanently) close up shop.
Indeed, Ibrahim Alkurd, the chief executive of New Mine and Partner at Lavaliere Capital, told Finance Magnates that “economies of scale play a big factor in mining farms.”
Ibrahim Alkurd, the chief executive of New Mine and Partner at Lavaliere Capital.
“The recent price drop in BTC caused smaller mining farms that have more expensive power and machine costs to unplug,” he said. “Although the bigger mining farms have seen smaller profits after the recent price crash, they’re still running profitably.”
The exodus of smaller miners could mean more centralization in the long run
Alkurd added that the downward price movements that Bitcoin has experienced as a result of the coronavirus crisis are particularly grizzly because of the upcoming “halvening” or “halving” in May 2020, which will result in the mining reward for Bitcoin miners to be cut in half.
This “will make it even harder for small farms to compete with the big players” Alkurd said.
This could have other, more serious implications for the Bitcoin mining industry over the long term: “I expect that we will see more centralisation of mining in the Bitcoin sphere with the May 2020 halving,” he continued. “The bar of entry to run a profitable mining farm is constantly being raised due to the reducing supply [of mining rewards] because of halving events.”
Of course, there is quite a bit of evidence that hash power on the Bitcoin network is already highly centralized: earlier this year, blockchain research firm found that as of “27th January 2020, [five] mining entities controlled 49.9% of the hashrate of the bitcoin network.”
Therefore, more centralization at this point could mean that the Bitcoin network is under greater security threats: Alex Batlin told Finance Magnates that in the long-term, lower hash rate “increases the risk of a 51% attack on the network.”
Should Bitcoin move away from Proof-of-Work?
“It’s a point in time issue really at the moment, but the bigger issue is more systemic. BTC currently operates on a ‘proof of work’ model [that requires] significant amounts of electricity and computational needs to operate, and is also very limited in the number of transactions it can process at the same time.”
“Other networks though are moving to a ‘proof of stake’ model that doesn’t require the massive computation, in terms of cost, power and people to operate. So, the question becomes: should BTC migrate to a ‘proof of stake’ model like other networks, and will the halving of BTC perhaps force them to make the move?” (Easier said than done, perhaps.)
On the other hand, Ibrahim Alkurd told Finance Magnates that although the decline in the price of Bitcoin “meant that the profit margins for miners are smaller,” it “isn’t anything out of the ordinary for this market” and that “there’s no effect on the Bitcoin network in terms of security. This volatility in hash rate and price is completely normal for this market.”
“Experienced miners should factor these swings into their models and be ready to react to them,” Alkurd explained, adding that “Bitcoin actually performed better than the DOW and the S+P 500 by a considerable amount in Q1 2020.”
In the meantime…
While the long-term effects of coronavirus on the Bitcoin mining industry may be impossible to avoid, Alkurd says that there are some steps that mining companies may be able to take to abate the effects in the short-term.
For example, instead of in-person maintenance checks, “utilize software to remotely monitor machines,” Alkurd suggested, adding that adding cameras to mining farms can make remote monitoring easier.
If in-person checks are absolutely necessary, “implement social distancing practices within the farms,” he added. Companies “can also reduce the number of staff in the [facility] at any one time. This can be done by altering the shifts of the workers.”
Additionally, mining companies located in countries where the virus has not yet passed its peak “can look at China and see what they did wrong and right, and learn from it.”
“Because of the way this virus has spread, we can use information from countries that have been impacted before us, so we can learn what to expect.”
What are your thoughts on the possible short- and long-term effects of the coronavirus on the Bitcoin mining industry? Let us know in the comments below.
Bitcoin may have crashed 50% in a single day in March, but this hasn’t stopped traders from investing in the cryptocurrency. In fact, a number of data sources suggest that a majority of investors are starting to load up on their BTC positions, despite the uncertainty in the global economy.Bitcoin Investors Are Buying At a Rapid ClipAccording to screenshots of crypto-enabled retail brokerages based in the U.K. shared by trader Nik Patel, users of these platforms are long on Bitcoin. In fact, for IG.com is signaling that 78% of client accounts are long on the cryptocurrency.Three of the most prominent retail brokers in the UK pic.twitter.com/kIvSpcvemG— Nik Patel (@cointradernik) April 4, 2020This isn’t the only evidence suggesting that the majority of crypto market participants are leaning long.Qiao Wang of Messari, a former institutional trader, recently shared the below chart, which shows the Bitcoin order book for Coinbase Pro.BTC order book… While I’m short-term cautious due to macro conditions, it can’t get any more long-term bullish than this: pic.twitter.com/snq8ISFMCF— Qiao Wang (@QWQiao) April 2, 2020Although not representative of other exchanges, it is clear that there are more traders bidding the foremost crypto than selling it, with there existing nearly 24,000 BTC worth of orders down to an order price of $2,000 and a mere 4,000 BTC worth of orders up to $12,000. Wang wrote that “it can’t get any more long-term bullish than this,” referencing the data.Source
During a global pandemic such as the coronavirus, some people expect the use of Bitcoin to increase globally. So far, that has not been too apparent, albeit it seems that the way Bitcoin is used is undergoing some changes.
Bitcoin has not been at the forefront of too many discussions lately.
Bitcoin Isn’t Doing Terrible
Most people expected the world’s leading cryptocurrency to come out on top when the stock markets crumbled.
That was far from the case, as Bitcoin still struggles to break $7,000 in a convincing manner.
New research by Chainalysis seems to confirm how people are using differently during the coronavirus crisis.
Not only is the darknet usage of BTC on the decline, it seems this dip affects other aspects as well.
Merchant transactions involving Bitcoin are dropping, which is only normal.
People are less eager to spend Bitcoin when there’s ample volatility and a chance for a price rebound.
Gambling with Bitcoin isn’t doing too hot either, but that is not necessarily something to be concerned about.
Gambling will always see its highs and lows, regardless of what goes on in the world.
The big question now is how things will evolve.
As Bitcoin mounts another price push, things could turn around very quickly.
Bitcoin has surged by up to 24 percent ahead of closing the week despite the Coronavirus-induced global market sell-off. Nevertheless, the benchmark cryptocurrency could end up losing a large chunk of its gains heading into the new seven-day timeframe.That is because of two bearish indicators. As Bitcoin trends upward, it is leaving behind a trail of pivot highs and lows converging towards a single point known as the apex. These price movements are forming a Rising Wedge, a reversal indicator seen in the bear markets. Meanwhile, bitcoin’s daily volume is falling, which also indicates a trend reversal is underway.BTCUSD forming two bullish reversal patterns at the same time | Source: TradingView.com, CoinbaseBoth Rising Wedge and Volumes are working hand-in-hand to push the bitcoin price down, Evidence of such behaviors are stamped across the trading history of traditional markets. The e-mini Russel Index in 2007, for instance, surged impressively amidst the Shanghai stock market panic but later confirmed the rise as a fakeout.E-MINI RUSSELL INDEX track record from 2007 | Source: InvestopediaThe same model shows that bitcoin could – any day – break below the Rising Wedge support trendline to confirm a breakdown. Such a move would have the cryptocurrency roughly test $5,000 as its next downside target. The length of breakdown is typically the same as the height of the Rising Wedge.Bullish CaseIt is important to notice that bitcoin this week has performed exceptionally well against a looming macroeconomic crisis led by the fast-spreading of the Coronavirus pandemic.The cryptocurrency’s 80 percent recovery after bottoming out below $4,000 in March has led optimists to predict an extended upside momentum. Top analysts believe that since central banks are injecting trillions of dollars into the banking system to offset the impact of Coronavirus, they are involuntarily devaluating the US dollar.That means that more and more investors would start offloading their cash reserves for scarcer assets. And since there can be only 21 million Bitcoin in existence, it is potentially a go-to-asset for the safe-haven seekers.The bullish sentiment for bitcoin is also visible in its technical narratives. Alistaire Milne, CIO of Altana Digital Currency Fund, tweeted his interpretation of bitcoin’s next moves.This would be evil …#bitcoin pic.twitter.com/3Z3NfcxvOC— Alistair Milne (@alistairmilne) April 4, 2020That means the bitcoin price would invalidate the Rising Wedge narrative and would rather trend inside an Ascending Triangle, a bullish continuation pattern.If it happens, the bitcoin price could easily jump above $10,000.Since you are here… Take advantage of the trading opportunities with Plus500Risk disclaimer: 76.4% of retail CFD accounts lose money. Source