Kategorie: Bitcoin News

Key Takeaways

• Bitcoin was the best performing asset class between 2011 and 2021, but the year 2022 has brought nothing but pain
• After rising 14X from its pandemic low in March 2020 to its all-time high in November 2021 of $68,739, Bitcoin has struggled amid risk-off environment
• Pullback has been so severe that majority of the supply is in loss-making position

What a ride it has been for Bitcoin. 

But as we close the chapter that is 2022, the party has turned into a nightmare for most. Literally, most. Because the majority of the Bitcoin supply, which as I write this is 19.24 million bitcoins, is in a loss-making position. 

I have written before about this trend, and as the chart above shows, we have seen greater than 50% of the supply in a loss-making position before. But after a respite, the market has again careened downward after a certain Mr Bankman-Fried was exposed. 

But it is quite the sobering statistic when considering that in the decade between 2011 and 2021, Bitcoin was the best performing asset class in the world. Exploding from fractions of a penny to near $69,000 last year, it made a lot of people very, very rich. 

But for anybody who bought in during the pandemic, the story is likely very different. In extending out the above graph back over the course of the decade, the ups and downs are evident.

Macro environment unprecedented for Bitcoin

The one thing that is glaring is that for the first time in Bitcoin’s history, it is now experiencing a bear market in the wider economy. 

Launched in 2009, Bitcoin had, until 2022, enjoyed one of the longest and most explosive bull markets in financial history. Risk assets across the board went sky-high, with the S&P 500 printing a 7X return from its low point amid the Great Financial Crash to its level at the start of 2022. 

“The scandals and idiosyncratic risk in the cryptocurrency space have been many this year. Nonetheless, despite the torrid happenings in the crypto industry which have undoubtedly made things a lot worse, Bitcoin has plummeted due to the wider macro environment, which has made a mockery of any thought that Bitcoin is not a high-risk asset”, said Max Coupland, director of CoinJournal, when assessing Bitcoin’s 2022 price action.

On this note, when plotting Bitcoin’s price level against the S&P 500, all looks healthy. Only thing is, I cut the chart off at the start of 2022. 

The below chart then does the same – plots the S&P 500 against Bitcoin. Only this time, it focuses on 2022, showing that both the stock market and Bitcoin have plunged. 

“Bitcoin is uncorrelated” narrative killed

Of course, the narrative that Bitcoin is uncorrelated is completely dead. Not only that, but the misguided thinking that led some to conclude that Bitcoin is an inflation hedge has been proven foolish. 

There is no other way to put it – Bitcoin has traded like a high risk asset. 

In fact, it has traded like such a high risk asset that not only was it the best performing asset of the decade between 2011 and 2021, when markets surged up and all these risk assets printed meteoric gains, but now that we are experiencing the flipside, it has performed worse than nearly anything. 

It has pulled back so severely that those gains which saw it claim that best performing asset title are now not enough to prevent the fact that most of the supply is held by investors in loss making positions. 

If you use our data, then we would appreciate a link back to https://coinjournal.net. Crediting our work with a link helps us to keep providing you with data analysis research.

Research  Methodology

• On-chain data sourced via Glassnode

• S&P 500 and Bitcoin price data sourced via Yahoo Finance

• Bitcoin the “best performing asset class of 2011-2021” sourced via Yahoo Finance

The post Most of the Bitcoin supply is now loss-making appeared first on CoinJournal.

Key Takeaways

• Core Scientific was worth over $4 billion last summer, but is down 985 form all-time highs
• Rising electricity costs are hiking costs with falling Bitcoin prices hurting revenue
• With hash rate near all-time highs, the entire mining industry is struggling

The crypto winter continues to take victims. The latest to succumb to Chapter 11 bankruptcy is Bitcoin miner Core Scientific.

Bitcoin’s plummeting price has quelled revenues significantly and, while cashflow is still positive, the revenue is not enough to cover operational costs. The goal is for the company to restructure under the Chapter 11 process rather than entirely liquidate.

Core Scientific has been struggling all year, in line with miners across the industry as they get squeezed on both ends – falling revenue in the form of Bitcoin prices and rising costs as a result of surging electricity costs across the globe.

The stock was trading at a market cap north of $4 billion last summer, but has now fallen 98% from all-time highs, its current market cap $70 million.

The share price did triple in short order last week when financial services company B. Riley offered to provide the company with $72 million in non-cash financing. The stock has since given up some of those gains.

Mining industry struggling

Across the entire industry, miners are finding it tough. Electricity costs and the Bitcoin price are the two most vital inputs for the bottom line of a bitcoin miner, and both have moved significantly against them this year.

So too has the hash rate, with it straddling near all-time highs for a lot of the year. A higher hash rate means more computing power is demanded to verify transactions on the Bitcoin blockchain. While a higher hash rate is thus seen as a positive because it increases the security of the network – it would cost more energy and time to take over the network – it also weighs on miners’ profit margins.

When the hash rate hit another all-time high of 250 TH/s in early October, blockchain analytics company Glassnode warned that “miners are somewhat on the cusp of acute income stress”. This latest story about Core Scientific proves that.

Looking at miner reserves, the number of bitcoins held by the large mining pools has also been steadily decreasing this year.

Mining stocks are a  levered bet on Bitcoin

It’s a poignant reminder that with these mining companies’ revenue denominated in Bitcoin, they are obviously extremely volatile stocks. Unfortunately, this year has brought the perfect storm giving rise to not only falling Bitcoin prices, but rising costs in the form of electricity, meaning miners have been hit twice as hard.

Looking at share prices, many companies have fallen further than the price of Bitcoin, which as I write this is trading at $16,800, down 64% on the year. Many mining companies are seeing losses that dwarf that in 2022.

They’ll hope that 2023 will bring better fortunes. But for Core Scientific, the road head is murkier. Now embroiled in the Chapter 11 process, it will hope to restructure and weather the storm, but there is no getting around the fact that the market for miners is likely to remain torrid in the short to medium term, at least.

The post Why are Bitcoin miners struggling so much? Core Scientific file for bankruptcy appeared first on CoinJournal.

Key Takeaways

• Chair of the US Banking Committee has suggested a ban on all cryptocurrencies
• Many declare that crypto is immune to government shutdowns, but this is only true directly
• By attacking the ecosystem and the ability to access it, crypto can be curtailed significantly by lawmakers

 

Bitcoin cannot be shut down, so the saying goes. But this misses the point.

Firstly, let me be clear and affirm that this mantra is true, technically at least. Bitcoin exists on the Internet and hence it is immune to being shut down. Unless, of course, you somehow shut down the Internet. But for all intents and purposes, Bitcoin is decentralised and exists in the online world, a feat of technology that makes it resilient to being restrained.

Bitcoin can’t be shut down directly, but indirectly is a different story

But while a direct shutdown of the blockchain is impossible, governments can, at least theoretically, dent Bitcoin heavily and curtail its adoption by the masses. It might not qualify as technically shutting it down, and I am not commenting on the likelihood that this happens, but there is little doubt that if a concerted enough effort is made, an assault by lawmakers on Bitcoin could be devastating.

We need only look at the prevalence of centralised entities in the space. While Bitcoin itself is decentralised, in order for the masses to access it, the vast majority go via centralised companies such as Binance or other exchanges. And what happens if governments go after these companies?

These companies will be forced to abide by the laws. Sure, decentralised exchanges (DEXs) will remain, and like Bitcoin itself, are resilient to being directly shut down. But would you expect Bitcoin to achieve mainstream success and continue to grow into a legitimate financial asset if DEXs were the only option?

Not only would institutions be reluctant to pursue this route, but they could also just be banned from holding it.

US Banking Committee Chair suggest banning cryptocurrencies

I write this article now in the wake of the story which emerged regarding the US Banking Committee Chair, Sherrod Brown, suggesting a ban on cryptocurrencies.

Brown said:

“I’ve already gone to the Treasury and the Secretary and asked for a government-wide assessment through all the various regulatory agencies. … The SEC has been particularly aggressive, and we need to move forward that way and legislatively if it comes to that.”

It has been scoffed at in some quarters, but it’s worth paying attention to. The US is the financial capital of the world. Were the SEC to come out and ban it, this would have a seismic impact.

Think of the chunk of the market that could be forbidden from holding Bitcoin – institutions, pension funds, public companies, etc. Or all the infrastructure that would be torn down, such as exchanges.

On the flip side, it does remain a remote possibility. And getting back to my point earlier about how people overlook the potential for governments to shut Bitcoin down, Brown did acknowledge that “We want them to do what they need to do at the same time, maybe banning it, although banning it is very difficult because it would go offshore, and who knows how that would work.”

Final Thoughts

I’m not predicting any sort of demise for Bitcoin or crypto off the back of this. I just think that too many overlook how damaging governments can be towards the world’s biggest cryptocurrency. 

Sure, the beauty of the blockchain is that it cannot be shut down directly. But indirectly? That is a different story. Governments carry too much power to be written off as “irrelevant” when it comes to Bitcoin.

So far, there is nothing to think that countries such as the US will make such drastic moves to ban crypto. But after a torrid 2022 that has seen scandal after scandal rock the space, comments such as Sherrod Brown’s are not surprising. 

In the remote possibility that these words were ever put into action, it would be foolish for investors to write it off as a benign development for crypto.

The post Arguing that governments can’t shut down Bitcoin is missing the point appeared first on CoinJournal.

• Bitcoin addresses with 100 or more coins hit 16,120 on 19 December 2022.
• Each address is worth $1.67 million at current prices, increasing the number of Bitcoin millionaires to the highest level since December 2021.
• Data also shows hodling is on the rise despite crypto winter, with 46% of BTC last active in 2+ years and 1.6 million coins last active in 1-3 months.

Bitcoin continues to consolidate around $16,700 after weathering recent sell-off pressure. Bears remain very much in the picture, given last week’s jump to above $18,000 and then the sharp fall to current levels.

But there’s an opportunity in the midst of all the contagion – and that is what Bitcoiners are capitalizing on.

Addresses with 100+ coins hit 1 year high

According to the on-chain and exchange flows monitoring platform Glassnode, sharks and whales have aggressively added to their overall holdings in the past few days.

Indeed, as the flagship cryptocurrency’s price hovers above its notable base on Monday, on-chain alerts for BTC indicate that addresses with 100+ bitcoins now hold the most coins since last December. Per the data, large accounts with at least $1,670,000 worth of BTC as of 19 December 2022 had jumped to 16,120.

This is a new all-time high, with the last 1-year high being 16,106 addresses recorded on 23 December 2021.

As large investors scoop Bitcoin on the cheap, the number of hodlers (people who buy Bitcoin and hold onto their assets long term regardless of market conditions) has also increased. As CoinJournal recently reported, whales have been busy, buying over $726 million worth of BTC despite the FTX contagion.

The latest data on this metric shows that the amount of BTC supply last active 2+ years has 46.3%, a 22-month high. According to Glassnode, 7.5 million BTC was being HODLed (the metric also counts lost coins) as Monday 19, December 2022. The last time the measure of hodled or lost BTC was this high was in January 2021.

Meanwhile, the number of coins last active 1-3 months is now more than 1,603,380 bitcoins. The moving average translates to a 3-month high for the number of coins that have not moved for the last 30 to 90 days.

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