- Bitcoin daily high at USD 9,933 as rally looks to be building
- Bitcoin miners are getting better at operating in a maturing industry
- US Fed Reserve chief insists money can be printed and issued digitally for as long as needed
For once, the weekend showed that Bitcoin bulls have not left the scene. A week after the Bitcoin reward halving event, as price showed a rather ho-hum attitude towards the Bitcoin supply dropping by 50% in a mechanism designed to reduce new coin supply into total circulation capped at 21 million coins, signals that the bull run that many thought would happen could finally be surfacing. Only, this means that the rally could be a slow burn effort rather than an immediate impact event.
Touching a high of USD 9,933, price is now at a mid-level USD 9,500 after some profit taking in Europe afternoon trading.
And have miners really changed their position in the industry? Last week, we wrote that fundamentals were as high as ever, and that they could even be hoarding up Bitcoin, with outflows to crypto exchanges being at their lowest in about 12 months. And then, we also talked about how Ethereum miners could be switching over to Bitcoin, strengthening the theory that miners could be sensing a rally coming for Bitcoin.
CoinDesk’s Noelle Acheson is firmly about the long game and she believes that Bitcoin mining has finally grown up to be a more structured, scaled, and “financialized” industry, a trend set to continue for a long time to come.
She points at how derivatives exchange FTX launched a new product called “hashrate futures”, based on the difficulty adjustments of the Bitcoin network. This is because hash rate can never truly be measured, and all benchmarks that exist today are merely estimated guesses based on how many miners are active, which kind of equipment they are activating, and basically, how much computing power is needed to solve the blocks spat out by the Bitcoin algorithm. All this is ultimately reliant on the so-called difficulty level set by the network.
In essence, no matter what kind of hash rate the total combined rigs put in to solve these cryptographic puzzles that determine when a block is found in Bitcoin blockchain, the algorithm must always adjust the difficulty of these puzzles so that eventually, a new block is found on average, every 10 minutes. If too many computers are pooled together, puzzles are solved more easily and blocks are found faster. So the network then adjusts this difficulty up. Conversely, if there is too little hash power in the network, then puzzles are too complex and blocks do not get found easily. Then, the difficulty is adjusted down so that blocks are found quicker. This process happens roughly every two weeks.
And miners at the end of the day, must understand and predict both variables since this means how much power they consume and have to pay as bills, so if they can hedge through an instrument like FTX, they can remove some of the uncertainty around the mining business model. Acheson writes:
“This particular instrument may or may not take off. Its significance is more that it could trigger a new wave of financial innovation that supports the growth and increasing sophistication of the bitcoin mining industry, which is struggling to adjust to reduced revenue and tougher competition. All this, just as the world is paying more attention to its output.”
All this comes just as the US central bank puts out yet another chest-forward statement regarding the magical abilities of the US dollar.
The chairperson of the United States Federal Reserve Jerome Powell said this in relation to the financial crisis and measures taken by the US Federal Reserve. But his comments drew responses on crypto Twitter, who see his views as proof that we need crypto to step in.
His words came during an interview on 60 Minutes, where he told Scott Pelley that the central bank printed money to flood the economy because the stock markets had crashed, pushing investors away from US Treasuries. But the Federal Reserve, he said, was able to print physical and digital money:
“As a central bank, we have the ability to create money digitally. And we do that by buying Treasury Bills or bonds for other government guaranteed securities. And that actually increases the money supply. We also print actual currency and we distribute that through the Federal Reserve banks.”
“We print it digitally.”
The “we” here is five people voting on changes to monetary policy within the Federal Reserve system during FOMC meetings.
5 out of 330,000,000. That’s all it takes to change US monetary policy.
Much harder with bitcoin.
— Marty Bent (@MartyBent) May 18, 2020
Not exactly a positive sign for fiat, but as one crypto commentator Nick Chong put it: “That’s a weird way of saying ‘buy Bitcoin'”.
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