Favorite trader says Bitcoin (BTC) has gone out of business. At the same time, key indicators and analysts in the chain cite the current price range as a “generation buy” opportunity. Meanwhile, various cryptocurrency outlets and financial media recently reported that Bitcoin miners are sending mass coins to signal exchanges that the $ 17,600 line is the characteristic sales at the bottom of the market.
There are so many reaffirmations from various anonymous and doxed analysts on Crypto Twitter, but the price of Bitcoin is still in a clear downturn, and the metrics do not fully show that traders are buying every dive.
The situation and attitude of bitcoin miners is a crucial part of the BTC price that many investors often overlook. That’s why Cointelegraph spoke with Rich Ferolo of Blockware Solutions and Will Szamosszegi of Sazmining Inc., to clarify what’s going on in the mining industry and what the implications might be for current market outlook.
Cointelegraf : Is bitcoin based? The price hit $ 17,600 almost two weeks ago and it looks like the armageddon on fund sales could be over. What do you think ?
Will Szamosszegi : It’s impossible to tell if bitcoin has reached the bottom or not. In general, I recommend people adopt a dollar cost optimization strategy: Buy the amount of bitcoins you feel comfortable with, on a regular schedule. We have seen larger withdrawals than ever before – like 93.7% in its early days and 83.4% in 2018. Bitcoin has made steady gains over any four-year period in its history.
TC: Currently, bitcoin is trading below the realized price and cost of production of the miners. The price has also fallen below the previous high and the hash rate is falling. Analysts on the chain generally consider these very low values as a buying opportunity for an entire generation, but is this really true?
Ferolo rich: Blockware did a lot of research on this and we calculated the weighted price from machines as old as s9 2016, at $ 0.07 per kilowatt the weighted price is $ 38,000 for s9. You will eventually see older machines leaving the network. For the s17s, at $ 0.07 per kilowatt, the break-even point should be around $ 18,000.
Newer machines are more efficient, and while it reduces the difficulty and hash rate adjustment for current-gen machines, anything over 90 terachs (TH / s) can escape it. Anything less than 34 watts per terahash is ineffective.
One factor to consider is that the value of the machines is falling. 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 of Bitcoin and prices in the wider cryptocurrency market.
Machines are assets and the machine is the important element of mining. Bitmain and MicroBT adjust their prices based on the rise in the price of BTC. It is an asset that in some way generates a daily return, similar to BTC.
If you are in the long run, you do not care about the current price of BTC. Just because the price of BTC drops does not mean that all miners will also decrease. It’s more about the durability of the fittest person. You need to be aware of macros, but that’s not as bad as you might think. There are different perspectives and situations depending on the size of the business you run. Large publicly traded companies need to consider many operating factors, but their operating costs (OPEX) increase their total cost even if they receive $ 0.05 per kilowatt. Its model differs from the analysis of the average miner who is not a listed operator.
TC: What is the current state of the BTC mining industry? There are rumors that leverage miners could go bankrupt, nonprofit miners die, and equipment is sold 50-65% cheaper than 2020-2021 prices.
What’s going on in the background and how do you think it will affect the industry for the next six months to a year?
RF: I agree with all your comments. We are currently at a price consolidation point and the market is clearing the amount of current mining debt. If you can keep and maintain mining, it could keep the hash rate and difficulty intact. Blockworks believes there is a real lack of infrastructure in the space. To have an infrastructure, you need to have an incredible amount of CAPEX to get started. There was and still is a lack of infrastructure.
Regardless of the machines out there, there is not much space for hosting. From a more general point of view, you will see many machines of capitalization, insolvency and surplus. I know that many big players are taking a break from mining financing. That’s an advantage for people who want to get into space, but we predicted a 60% rise in the hash rate in 2022 when things were booming. And, as s19XP is seen, the hash rate will increase.
WS: Many veterans of this space have become accustomed to these cycles in the Bitcoin ecosystem. Historically, you see the hashrate go down after the price does the same. In dips like this, newer miners tend to be destroyed, and the network grows stronger. In the next six months, mining will become more competitive as the major players can consolidate and buy mining companies at a discount.
TC: Why is now just the right or wrong time to start mining? Are there any specific on-chain or profitability metrics that miners look for, or is it clear that the current price of bitcoin mining is worthwhile?
Let’s say I have a million dollars in cash, is this the right time to start an operation and start mining? And between 300,000 and 100,000 dollars? In the $ 40,000 to $ 10,000 range, why not make it a good time to set up shop or use a host mining service?
RF: Regardless of the size of the investment, I do not think that any of these values justify trying to build large – scale infrastructure. You get a million dollar worth of machines at $ 5,000 per machine 200 machines, or almost 0.6 megawatts. 1 megawatt of power equals 300 machines. Housing 200 machines is very different from housing 2-10 machines. To diversify $ 1 million into $ 300,000, or 60 machines, this is where you want to start looking at hosting, assuming you want to bet on mining.
I consider mining as a hedge, so I would take 60% of the capital to buy machines and 40% to buy BTC in cash, ie 60% CAPEX for machines, 20% for OPEX and 20% for BTC in cash. This is a broader place to consider hosting. With $ 100,000 you get 20 machines, so you can implement the same strategy. Most homes cannot handle such energy demand. There is a power resource threshold for home mining, so you need to consider how much power you can supply to your home without closing the neighborhood.
The $ 10,000 to $ 40,000 range is more conducive to domestic mining. If your electricity rate is set at $ 0.10 or less, you could withdraw it, depending on the price. With $ 40,000, you will have about eight machines. It’s more possible, to be honest. That’s about 24.4 kilowatts per hour on eight machines if you start with four or five machines and test the waters. It’s almost like saving up to buy machinery if prices continue to fall.
Read also: Buy bitcoins or start mining? HashWorks CEO emphasizes ‘attractive returns’ from BTC mining
TC: Are there significant future consequences for the industry’s assets and foundations falling below all time high for the first time ever?
WS: The basis of BTC remains unchanged, which is why I still expect BTC to become a global reserve asset. In the meantime, the sector will learn the lessons of this crisis: Do not over-leverage and do not offer returns that make you vulnerable.
RF: Great question, I think, based on the current situation where people (individuals) were expected to be bought in the previous cycle. Smart money expected a long bear market, but what surprised everyone was the timing and how fast it happened. The long-awaited mysterious explosion never happened.
Cryptocurrency is much more exposed and there is much more bad press due to the recent implosions and we will see more because it is always the bad news that gets the attention and it is easier to generate. For those who believe in BTC, they will not ignore it and it is a timely time to buy and invest in this space, especially when the bad energy has cleared out.
Probably a lot of people have sold the bottom and will not come back, but that’s just the basic dynamics of the market.
TC: The next half of network rewards is approaching in 676 days. How do you think this will change the landscape of industrial mining and the amount of equipment required to solve an algorithm that becomes increasingly difficult to calculate with each half?
RF: The miners usually pull on the half events. I am surprised that the current hash rate is not reduced anymore. We have not seen the previously predicted sharp drop, about 20 to 25%. This is because older gen machines have to unplug and the reward does not match the cost, but due to the predicted increase in the hash rate by each half, older gin machines have a short – term benefit. Miners unplug when OPEX is missing, then plug in again when the time is right.
WS: Miners will want to cut costs as half of the bitcoin reward could make many mining operations unprofitable (assuming the fixed price of bitcoin is in US dollars). The efficiency of mining equipment will continue to improve and miners will continue to search for the most cost – effective energy sources. Idiot is one of the many great features of the Bitcoin network because it eliminates inefficiencies.
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