After all, the bull needs a rest once in a while.
As the holiday season in China wrapped up with the Year of the Bull ringing in, we really hoped the metaphorical bull kept churning away as bitcoin became ubiquitous as the main talking point in all of most major financial/business media outlets. To the point where we became inundated with daily historical highs, we come face to face with reality knowing that once in a while, the bull does need to rest.
Since hitting highs on February 21 with price action near $58k, the price has pulled down to a current reading of $44k constituting a drop of around 23%, which would epitomize this as being in a bear market, but bitcoiners know how to hang around unlike the rush of new investors that pulled out from weak hands thinking this was a market calamity looking to dip lower. But if those who know best, one should always buy the dip, especially when it comes to bitcoin.
Speaking of buying, or in other words, conducting a simple transaction on the Bitcoin network, this action alone is becoming more and more expensive which gets conflated with inefficient by the uneducated media. For the past few weeks, a simple bitcoin transaction would cost $20 making any bitcoin newcomer skeptical of bitcoin’s usage along with their concomitant backlash. But to any cryptographer and real bitcoiner, we know this is the price we pay for a decentralized monetary policy. For an immutable sound money system, we can trust for decades to come most definitely comes with a price that needs to be paid even though at times it may seem contradicting to what Bitcoin is predicated under with.
Luckily the Bitcoin network is open-sourced, open to discussion, open for permissionless usage, and open for upgrades. The likes of SegWit, side-chains, and layer 2 options such as the Lightning Network have all been brought to the table pacifying the critics of high tx costs. It’s a work in progress as is the Bitcoin Network itself. The gamut is available, it’s just a matter of more education and adoption of those other payment solutions.
On the flip side, one could also manage their transactions and transfers on a third-party trusted exchange. Over the past months, the delta spreads of net transfer volumes have seen spikes in volatility all in line with what we expect as the bitcoin boom drums along. On February 21, almost $2 billion in net transfer volume hit exchanges but then quickly coincided with an almost $1 Billion in negative net transfer volume which went along with the current drawdown we see. Historically, March has been a tough month for bitcoin as we evidently saw last year.
But in hindsight, that would’ve been a golden opportunity to stack sats and catch the ride we saw over the past few months. Easier said than done of course but as miners, we know how to stay grounded and hash away. Because the chasm between miners and traders is that miners have more skin in the game. And that’s what we try to educate our users in that mining is a way to support this technology rather than exploit it for short-term gains. But of course, it’s innocuous that block rewards are part of the equation as well.
Over the past few months, we have seen the almost palpable realization of nearly 100% of UTXOs in profit (Definition: the percentage of unspent transaction outputs whose price at creation time was lower than the current price). Amazing to say the least and a great way to pacify the naysayers. But although the current drawdown has some traders show weak hands, in the common proverbial saying goes “we are still early”. In the chart that displays the red zone as 95% or above for the benchmark, the timeframe that we have been in this recent red zone is still quite short compared to 2017’s bull run where the time spent in the red zone lasted for nearly a year. We’ve only been in the red zone for about 4 months only. So strap in and enjoy the ride to the moon miners!
WRAP UP
In a recent article put together by David Pan of Coindesk, it outlines and lists the plethora of Chinese companies all trying to cash in on the bitcoin mining frenzy by investing in data centers and local farms. As natural as it might be for anyone these days that have a slight interest in digital currency, this move comes and has attracted a myriad of non-crypto firms to the market. The biggest one making the biggest splash was 500.com, which is a lottery firm based in Shenzhen, announcing in December of 2020 their intent to sign with the State Grid Corporation of China to receive discounted electricity costs for their mining farms. In another example, a Chinese emergency services provider, SOS, saw its publicly listed stock rise 300% YTD as it has also expressed interest in bitcoin mining. What we see is no different than what all other firms in the world are doing. They see the opportunity bitcoin can bring to their balance sheets, and they naturally gravitate towards it. In the same way as how any firm would capitalize on any potential lucrative investment. And that’s the power of bitcoin we will continue to see.
As for what we see with existing crypto companies, well it seems as though the reverse is happening as many are seeking to go the traditional route and become publicly listed companies on centralized exchanges. A bit of a contradictive move but a move initially set by Coinbase as they have successfully filed for an IPO. A move that would be a first for a major crypto exchange in the world. The Hangzhou, China based Ebang has closed a public offering with investors agreeing to purchase 14 million units at $5 per share. Hopefully, these new proceeds can expedite manufacturing orders of mining equipment which still sees a tight backlog.
In more what seems to be continuous and nefarious mining news, a group of seven men was arrested in Malaysia for stealing millions of dollars worth of electricity to mine bitcoin in certain parts of the country. Supposedly almost 2,000 mining units were seized that are worth an approximate $64,000 at the time of capture. If it isn’t safe to say that bitcoin mining is bringing in all sorts of people to the game.
Stay safe mining with 1TMine!
About Valarhash
Chengdu-based Valarhash integrates mining machine sales, miner hosting, mining pool, and mine construction services. Led by CEO Fiona Lv, Valarhash aims to provide users with transparent and beneficial mining plans using advanced technology, with lower barriers of entry. Business operations cover hardware research and development, digital asset transactions and 1TMine hash power contract sharing. With a leading position in the hash power market, Valarhash integrates frontier resources with global vision, providing crypto compute service (CCS) and linking physical and digital worlds with blockchain technology.
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