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Bitcoin mining equipment and electricity costs keys to profit strategy post halving

Speculate or mine? What is the best strategy forward for Bitcoin?

BTC could double to $20,000 this year Amazon is exploring accepting bitcoin and creating its own crypto asset The post-halving environment presents challenges for some miners, especially those who rely chiefly on inefficient equipment

Bitcoin (BTC) price predictions are easy to make. In fact, Bloomberg is predicting that by end 2020, Bitcoin should reach the $20k plateau, same level as end 2017.

This is Bloomberg, not some wisecrack, but even they can be totally wrong.

Many would be FOMO investors take the hint and analysis and buy Bitcoin, hoping the target materializes, but more often than not, it does not and money evaporates. 

Will BTC prices skyrocket?

The $20K reasoning

Business Insider said Bloomberg is taking the opposite side of Goldman Sachs (Last week, Goldman listed five reasons investors should avoid bitcoin), saying in a note published on Tuesday that BTC could double to $20,000 this year.

The most popular cryptocurrency has so many favorable fundamental and technical factors that “something needs to go really wrong for Bitcoin to not appreciate,” Bloomberg said.

“Bitcoin will approach the record high of about $20,000 this year, in our view, if it follows 2016’s trend,” Bloomberg said.

Bitcoin’s maturation, fueled by the growing acceptance of digital currencies, the ability to trade bitcoin futures, and a steady decline in volatility, should keep it tilted toward price appreciation, the research note said.

Also, the coronavirus pandemic is accelerating the shift towards digital money while new quantitative-easing (QA) policies from central banks around the globe are “helping independent stores-of-value such as gold and bitcoin,” Bloomberg said.

Read: Frost & Sullivan Presents a Strategic Framework for a Blockchain-enabled World

Investments in Blockchain and Bitcoin

According to ForbesInvest, e-commerce and financial firms are racing to develop the most profitable applications of blockchain technology, the computer program underlying bitcoin.

Facebook, Square, Fidelity, Google and Goldman Sachs are leading the charge, spending millions on projects that will lead to the mass adoption of this technology.
 With huge institutions backing it up, bitcoin could be stronger than ever.

  • Earlier this year, Visa just granted Coinbase power to issue bitcoin debit cards.
  • Jack Dorsey, CEO of Twitter, shared last year how he’s taking steps towards incorporating bitcoin and other cryptocurrencies into his payments business, Square. And last month, Square allowed its users to make automatic purchase of bitcoin.
  • Fidelity announced in May 2019 that it’s offering bitcoin trading to its institutional clients.
  • Amazon is exploring accepting bitcoin and creating its own crypto asset.
  • Crypto asset-backed ETFs—a whole new investment class—are gearing up to come to market.

Read: Bitcoin halvening aftermath lackluster, COVID-19 positions BTC as investors’ new gold

An up and down and up story

Having topped out at a record high of $20,000 in mid-December 2017, bitcoin fell by 75% in 2018, according to Coindesk. The cryptocurrency bottomed out near $3,100 in December 2018 and rose 90% in the following year. 

After a mostly stable 2020 in the first 4 months (around $5k-$6k), BTC rose above $10,000 in early May, and today is hovering near that level.

Bitcoin is capped at 21 million coins and its mining policy is set in code to be cut by 50% every four years, with the latest halvening event happening last May, cutting block rewards from 12.5 to 6.25 BTCs. 

We’ve heard the term Bitcoin investing is a marathon and not a sprint, but today investors are playing an altogether different game: Mining for profit. 

Mining difficulty is down

According to The Block, BTC’s mining difficulty — a metric for the ease by which miners can create new transaction blocks on the network – fell on Thursday June 4.

The difficulty dropped to 13.7 trillion at block 633,024. The fall represented the second-biggest move of its kind for 2020, and the fourth such decline since the start of the year.

The Bitcoin network changes its mining difficulty every 2,016 blocks, roughly every two weeks, in order to keep the average block production interval at every 10 minutes.

If more people have joined the mining game, resulting in a higher hashrate and an average sub-10-minute interval, the network will automatically increase the difficulty again. Conversely, if more people have unplugged from the network during any cycle, leading to a lower hashrate and longer block intervals, the network will ease the difficulty to make it easier to mine.

Source: Blockchain.com

The post-halving environment presents challenges for some miners, especially those who rely chiefly on inefficient equipment. A difficulty reduction is a signal that miners have left the network, suggesting that the expected exit for some poorly-performing equipment is taking place.

Read: Bitcoin Halving: Definitive Guide (In Just 5 Minutes)

All in the BTC mining equipment

Bitmain and MicroBT, the two major Chinese mining equipment makers, have been dispatching their most efficient ASIC miners like the AntMiner S19 and WhatsMiner M30S since May. 

According to their official websites and major distributors, pre-orders for these top-of-the-line machines for July, August and September batches are mostly sold out.

News.bitcoin.com said that Bitmain on Monday released the Antminer T19, a cheaper bitcoin mining machine, in an effort to regain lost market share.

The Beijing-based company said the Antminer T19 has computing power or hashrate of 84 terahash per second (TH/s) and power efficiency of 37.5 joules per terahash (J/TH).

The latest hardware is modeled after Bitmain’s more efficient BTC miner, Antminer S19, only cheaper. With hashrate of 95 TH/s, the S19 model costs $1,785, some 2% higher compared to the T19 series, which is selling at $1,750.

According to F2pool, a global bitcoin mining network, the new T19 model generates up to $3.17 of profit each day. That compares with earnings of $3.96 per day for the Antminer S19. The figures are based on an average electricity cost of $0.05 per kilowatt per hour.

Forbes said that Riot Blockchain, a NASDAQ listed cryptocurrency mining company, announced it had purchased an additional 1,000 next-generation Bitmain S19 Pro (110 TH) Antminers for $2.3 million from Bitmain.

 Seemingly this could be an indication that Bitcoin’s recent halving is making the mining industry more competitive.   

For its part, the Coin telegraph said that for Bitcoin miners in countries with subsidized electricity such as Venezuela or low electricity prices such as China, where most of the hashing power on the Bitcoin network resides, a production cost increase can prove manageable. But for those in the higher electricity brackets, such as the ones found in Europe, their operations may rely heavily on Bitcoin’s post-halving price action.

Source: Powercompare