Your favorite trader is saying that Bitcoin (BTC) has a bottom. At the same time, the top indicators of the chain and experts in the current price range cite as a “generational buy” opportunity. At the same time, various cryptocurrencies and financial media recently reported that Bitcoin miners who sent a number of coins to stock exchanges were a sign that $ 17,600 was the extremist movement that was bottoming out the market.
There is so much reassurance from various anon and doxed analysts on Crypto Twitter, but Bitcoin prices are still in a clear declining trend, and the scales do not fully reflect that traders are buying every dip.
An important factor in BTC prices that many investors often overlook is the state and attitude of Bitcoin miners, which is exactly why Cointelegraph had a chat with Rich Ferolo of Blockware Solutions and Will Szamosszegi of Sazmining Inc. to get clarity on what is happening in mining. industry and how this could affect market sentiment in the future.
Calligraphy: Is the bottom for Bitcoin? The price touched $ 17,600 almost two weeks ago and it’s starting to feel like Armageddon’s fundraising could end. Thoughts?
Will Szamosszegi: It is impossible to say whether Bitcoin has bottomed out or not. In general, I recommend an estimate of the average dollar cost for people: Just buy how much Bitcoin you feel comfortable with on a consistent schedule. We’ve seen write-downs even bigger than this before – like 93.7% in its early days and 83.4% in 2018. Bitcoin has always benefited every four-year period in its history.
CT: Currently, Bitcoin trading is below real and below the cost of mining production. Prices also fell below the previous historical high and the hash rate is falling. Experts in the chain usually point out that these measurements reach very low lows as a generational buying opportunity, but is it?
Rich Ferolo: Blockware has done a lot of research on this and we have calculated the compensation price from machines all over again and s9 from 2016, at $ .07 per kilowatt, the compensation price is $ 38,000 for s9. You will see older machines get rid of the internet eventually. For s17s, at $ .07 cents per kilowatt, BTC needs to be at around $ 18,000.
New machines are more efficient and while the difficulty and adaptation of hash speeds is declining for current generation machines, anything over 90 terahashes (TH / s) can do so. Anything under 34 watts on Terahash is inefficient.
One factor to keep in mind is that the value of machinery is declining. Even if the price of BTC starts to rise and there is a coexistence between prices and macroeconomic factors that affect Bitcoin prices and prices throughout the broader cryptocurrency market.
Machines are hard assets and the big part of mining is the machine. Bitmain and MicroBT adjust prices as BTC prices increase. This is a hard asset that in a way gets a return on a daily basis, in the same way as BTC does.
If you are in a long game, you do not care about the current price of BTC. Just because the BTC price goes down does not mean that all miners will go down too. It’s more about survival of the fittest. You need to be aware of macros, but it’s not as bad as one might think. There are different perspectives and situations depending on what size you are running. Large public companies have many operating factors to consider, but their operating costs (OPEX) increase their total costs even if they receive $ 0.05 per kilowatt. Their model differs from the analysis of the average student outside the public user.
CT: What is the status of the BTC mining industry right now? There are rumors that indebted miners could go under, inefficient miners are turning off and equipment is being sold 50% to 65% lower than prices from 2020 to 2021.
What’s going on behind the scenes and how do you see this affecting the industry over the next six months to a year?
RF: I agree with all your comments. We are currently at a price point and the market is clearing up the amount of mining debt that exists. If you can keep going and keep mining, it could keep your hash speed and difficulty at bay. Blockworks believes that there is a significant lack of infrastructure in the space. To have the infrastructure, you need to have an incredible amount of CAPEX to get started. There has been and still is a lack of infrastructure.
Regardless of what hosts are available, there is not much space for hosting. From a broader perspective, you will see a lot of contempt, bankruptcy and excess machines. I know that many of the big players are taking a break from mining. That’s a plus for people who want to get into the space, but we predicted a 60% increase in the hash rate in 2022 when things were booming. And when s19XPs are discovered, the hash rate will go up.
WS: Many veterans in this space have become accustomed to these cycles in the Bitcoin ecosystem. Historically, you see a hashrate drop following a price do the same. In layoffs like this, newer miners usually flush out while the network gets stronger. Over the next six months, mining will become more competitive, with larger players being able to merge and buy miners at a discount.
CT: Exactly why is now a good or bad time to start mining? Are there specific chain or profitability metrics that miners are looking at or is it just a matter of time that current Bitcoin pricing makes mining attractive?
Let’s say I have $ 1 million in cash, is that a good time to start a business and start mining? How about $ 300,000 to $ 100,000? Ranging from $ 40,000 to $ 10,000, why might not be a good time to set up a home or use a hosted mining service?
RF: Regardless of the size of the investment, I do not think any of these values frankly justify you wanting to scale up infrastructure. A million dollars worth of machines at $ 5,000 per machine gives you 200 machines, almost 0.6 megawatts. 1 megawatt of power is equivalent to 300 engines. Hosting 200 machines is very different from hosting 2 to 10 machines. To diversify to $ 1 million to $ 300,000, or 60 machines, this is where you want to start exploring hosting, provided you are all in mining.
I treat mining as hedging, so I would take 60% of the capital and buy machines and 40% buy BTC in cash, or 60% CAPEX for machines, 20% for OPEX and 20% for BTC. This is a broader place to think about hosting. $ 100,000 gets you 20 machines, so you could apply the same strategy. Most residential homes do not have such a large energy demand. There is a threshold for electricity capacity at home for mining so you need to consider how much power you can get into your house without shutting down the neighborhood.
The $ 10,000 to $ 40,000 range is more suitable for home mining. If your power ratio is fixed at $ .10 or lower, you could reduce it, depending on where the price is. $ 40,000 will get you about eight machines. It’s more feasible, to be honest. That’s about 24.4 kilowatts per hour for eight engines if you start with four to five engines and test the waters. It’s almost like a dollar-cost average in machines and buying them if prices continue to fall.
Connected: Buy Bitcoin or start mining? The CEO of HashWorks points to the “attractive return on investment” in BTC mining
CT: Has the price of BTC falling below an all-time high for the first time ever had a significant future impact on the fundamentals of the property and the industry?
WS: The basics of BTC remain unchanged, which is why I still expect BTC to develop into an international reserve fund. The industry, on the other hand, will learn from this collapse: Do not be hallucinating and do not offer a return that makes you vulnerable.
RF: Great question, I think from where we are now, it was assumed based on where people (retailers) had bought in the previous round. Clever money expected a long bear market to happen, but what has surprised everyone is when and how fast it happened. The mysterious long-awaited T-shirt never happened.
Crypto has much more exposure and much more bad pressure due to recent explosions and we will see more because news loves bad pressure and it is easier to create. For those who believe in BTC, they will ignore it and it is a convenient time to buy and invest in the space, especially when all the bad energy has been cleared out.
Lots of people have probably sold the bottom and will not return, but this is just the base market.
CT: The next halftime reduction of online prizes is approaching in 676 days. In your opinion, how will this change the landscape of industrial mining and the amount of equipment needed to solve algorithms that will be more difficult to calculate with each halving?
RF: Halving events tend to stimulate miners. I’m surprised that the current hash rate has not dropped further. We do not see the large reduction that was expected before as 20% to 25%. This is because older generation machines have to be disconnected and the prize does not match the cost, but the expected increase in the hash rate that accompanies each half means that older generation machines benefit in the short term. Students disconnect when OPEX is unfavorable and then reconnect when the time is right.
WS: Miners want to reduce their costs, as half of the rewards in Bitcoin can make many mines unprofitable (compared to a stable Bitcoin price in US dollars). Mining equipment will continue to improve efficiency and miners will continue to look for the most efficient energy sources. Half is one of the many masterpieces of the Bitcoin network because it flushes out inefficiencies.
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