Is the mining machine market going to be hot again? Bitcoin breaks through $34,000 and experiences huge fluctuations, and various capitals are accelerating to enter the market for "layout"

Our reporter Hu Jinhua (chinatimes.net.cn) reports from Shanghai

At the beginning of 2021, the cryptocurrency market kicked off trading with a staggering increase.

On January 2, Bitcoin opened at $29,327, breaking through the $30,000 mark and rising to $33,299 per coin. On January 3, Bitcoin rose to $34,762 and closed at $33,012 per coin. Then on January 4, the price of Bitcoin quickly fell to $27,777 and then rose to $31,991 per coin. On January 5, the price of Bitcoin temporarily fell by 7.98% and then hovered around $30,500. Bitcoin experienced huge fluctuations in four trading days.

On the one hand, the astonishing increase in the price of Bitcoin has shocked the global market; on the other hand, global capital has further accelerated its entry into the market. On January 4, the US hedge fund Skybridge Capital announced the official launch of the Skybridge Bitcoin Fund, which currently manages $310 million in assets and has invested $182 million in Bitcoin. New investors can start participating from January 4, 2021. On the same day, the domestic Internet company 9th City (hereinafter referred to as "9th City", Nasdaq: NCTY), listed on Nasdaq, also announced that it had signed a legally responsible cooperation and investment terms agreement (Term Sheet) with Kong Jianping, the former co-chairman of Canaan Creative, and four others. 9th City will grant shares and warrants to partners in agreed installments, obtain cash investment from partners, and exclusively assist 9th City in carrying out digital currency-related businesses and starting the purchase of mining machines for mining.

"I think the players behind Bitcoin are now mainly Wall Street institutions. The current market situation is obviously not dominated by small and medium-sized retail investors, and the future trend of Bitcoin prices depends on the enthusiasm of various capitals for the market." On January 5, Xie Bin (pseudonym), an investor with seven years of experience in cryptocurrency trading, told our reporter.

Bulls are already calling for a six-digit price for Bitcoin

What force has given rise to this round of Bitcoin's rise? How sustainable is this round of growth? As overseas capital flocks to the field of crypto assets led by Bitcoin, how does domestic "capital" treat it? These questions have obviously attracted great attention in the industry.

As for the huge fluctuations of Bitcoin around the $30,000 mark this time, Yu Jianing, rotating chairman of the Blockchain Committee of the China Communications Industry Association and president of Huobi University, is relatively indifferent.

"Since the birth of Bitcoin, its price has been volatile, and generally speaking it has experienced two major highs and lows. One was in November 2013, when the price of Bitcoin reached nearly $1,000, but it fell all the way in September 2015, falling to a low of $200; the other was in March 2017, when the price of Bitcoin exceeded the price of an ounce of gold for the first time, and hit an all-time high of $19,875 in December of that year, and then entered a nearly three-year low, with the price dropping to $3,000 at the end of 2018," Yu Jianing analyzed.

In Jianing's view, the main reason for the current rise in Bitcoin is that global central banks have flooded the market with money under the influence of the epidemic, which has increased investors' demand for assets to fight inflation. In order to stabilize the market and the economy, the fiscal stimulus of central banks in various countries is unprecedented. Both houses of the U.S. Congress passed the latest round of stimulus plans with a scale of $900 billion with a high vote. Since the outbreak of the epidemic, the U.S. government has launched three rounds of fiscal stimulus plans totaling about $3 trillion. Under this loose monetary policy, global inflation expectations have risen, and the market demand for inflation-resistant assets has increased significantly.

Our reporter also learned that what is attracting more attention at the moment is the future price trend of Bitcoin, and the reports or expectations recently released by overseas billionaires and consulting agencies directly point to six-digit prices.

"In the next year or so, the price of BTC may exceed $100,000. The price of Bitcoin has more than doubled since May last year. But in the next 12 months, the price of Bitcoin still needs to rise by about 300% to reach the expected six-digit figure. It now appears that the price trend of Bitcoin echoes the predictions of our earlier Stock-to-Flow (S2F) model. People often ask me if I still believe in my model. To be clear, we have no doubt that the Bitcoin S2FX model has the correct predictive ability and that Bitcoin will reach $100,000-288,000 by December 2021." In this regard, Mark Yusko, CEO of US consulting firm Morgan Creek, and plan B, the creator of the model, wrote on their respective Twitter on January 3.

At the same time, Morgan Creek is not the only institution that holds the view that the price of Bitcoin will rise to six figures within a year. Overseas chain analyst Will Woo also pointed out on Twitter recently that more evidence shows that the price of Bitcoin will reach $200,000 per coin in 2021.

What's more, in November last year, an analyst at Citibank said in a report to clients that Bitcoin could reach a high of $318,000 in 2021. The Citibank analyst believes that Bitcoin is in the middle of a bull market and looks like a "very clear investment channel", so he believes that the target price of Bitcoin in December 2021 should be set at $318,000.

On January 2, Tyler and Cameron Winklevoss, founders of Gemini Exchange, believed that Bitcoin "is a better gold than gold", which means that a price rise to $500,000 is also very likely. The latter pointed out that MicroStrategy and other investment companies buying a large amount of Bitcoin is just the beginning of a major shift, and more importantly, Wall Street has already started the Bitcoin investment boom, and Bitcoin will quickly become part of its "no-brainer" investment portfolio.

Various institutions accelerate participation

In the view of industry insiders, the enthusiasm for Bitcoin investment has undoubtedly been thoroughly aroused, while the investment participation paths at home and abroad are different.

"Take Grayscale Assets, the world's largest virtual digital currency asset manager, as an example. Its total management scale has risen to US$22.8 billion on January 4, and there are countless other funds of hundreds of millions of dollars. In China, we don't see too many examples, but judging from the cooperation between the US-listed 9th City and former executives of Canaan Creative, domestic investors prefer the mining path. Although the investment path is conservative, it is more stable." Wang Heng, a senior analyst in the Shanghai digital currency market, told a reporter from the China Times on January 5.

It is worth noting that the announcement released by The 9th City shows that it has established a wholly-owned subsidiary, NBTC Limited, and has worked with partners including Kong Jianping, former co-chairman of digital currency mining company Canaan Creative, Sun Qifeng, former director, and Zhang Li, Li Enguang and other senior people in the digital currency business field to focus on blockchain digital currency related businesses. According to the signed cooperative investment terms, in addition to cash investment, partners such as Kong Jianping will also be committed to assisting The 9th City in developing related businesses centered on digital currency mining. The 9th City will establish a digital currency mining machine group, and the goal is to contribute 8%-10% of Bitcoin's global computing power, 10% of Ethereum's computing power, and 10% of Grin's computing power. In addition to obtaining The 9th City Class A common stock after signing the contract, the partners will receive The 9th City warrants in four phases. The warrants will take effect when the value of The 9th City reaches US$100 million, US$300 million, US$500 million, and US$1 billion, respectively. When all warrants are exercised, the total number of Class A common shares of The9 obtained by the investor will be 216,000,000 shares (equivalent to 7,200,000 American depositary shares), and The9 will receive a total investment of US$34 million. The9 has the right to receive investment funds and warrant exercise prices in the form of digital currency (including Bitcoin) in the final agreement.

"The 9th City has previously begun to lay out its blockchain and digital currency related businesses. This time, we are working with Mr. Kong Jianping and other digital currency industry veterans to actively implement related businesses in the digital currency field. Our goal is to build and operate a digital currency mining business with the highest share of digital currency computing power in the world. In addition to leveraging the rich experience and resources of our partners and their teams in the field of digital currency mining machines and digital currency mining to launch the operation of a mining machine group with leading digital currency computing power in The 9th City, we will also accelerate the promotion of other digital currency related businesses through the establishment of NBTC Limited. It has been exactly 12 years since the birth of Bitcoin, and we believe that digital currency will bring more convenience to life." In this regard, Zhu Jun, chairman of The 9th City, said.

Kong Jianping, one of the partners, said that the cooperation will assist The9 in purchasing cryptocurrency mining machines, including but not limited to Avalon, Antminer, Whatsminer and Ipollo. At the same time, a professional team will be deployed in The9 to actively carry out various businesses in the field of digital currency.

An industry insider told our reporter that after the price of Bitcoin hit a record high, the previously quiet mining machine market will usher in another round of enthusiasm, and domestic investors may once again buy mining machines to "mine coins." Mining is relatively risk-free, after all, the current price of Bitcoin at $30,000 is too tempting.

Editor-in-charge: Xu Yunqian Editor-in-chief: Gong Peijia