After the Bitcoin halving event: the bull market that failed to meet its promise, the anxious miners and the whales that absorbed the funds

Over the past week, Bitcoin miner Zhang Zhang has watched his bet go wrong, and his mood has plummeted.

On May 12, Bitcoin ushered in the four-year halving event, which was completed at block height 631008. As a result, the Bitcoin mining reward for miners for each block they create will drop from 12.5 to 6.25.

Even though the output is facing a halving, Zhang Zhang still hopes for the bull market triggered by the past halving events. In order not to miss the possible surge in Bitcoin prices, he deliberately slowed down the pace of selling old mining machines. Take the S9 mining machine he bought in the second-hand market two years ago as an example. It has been nearly four years since it was launched. Compared with this year's latest products, its computing power and power consumption are far inferior, and it should have been abandoned long ago.

But in Zhang Zhang's view, if the increase in Bitcoin prices can offset the impact of halving production, these mining machines may still be able to generate profits.

Now, more than a week has passed since the halving, but the expected "bull market" has not yet appeared. The price even fell to as low as $8,150 two days before the halving. After the halving, the price of the currency rose slightly, but it is still difficult to break through the $10,000 mark.

Faced with a relatively stable coin price, miners cannot escape the fate of halving their income. Before the flood season is about to arrive, tens of thousands of old mining machines have been removed from the shelves and shipped to Sichuan, where electricity costs are low. In the secondary market, the forces of long and short are rising and falling, and the situation is stalemate. Overseas whales are surfacing and becoming the most determined bulls of Bitcoin.

The price of the currency unexpectedly rose slightly, repeatedly testing the $10,000 mark

What is Bitcoin halving? In the original design of founder Satoshi Nakamoto, the total amount of Bitcoin is limited, with an upper limit of 21 million, and every 210,000 blocks are produced, about every four years, the Bitcoin reward received by the miners who produce the blocks will be halved once, until Bitcoin can no longer be subdivided.

Looking back at the first two halvings since the birth of Bitcoin in 2009, they were almost always linked to a surge in prices. In November 2012 and July 2016, Bitcoin completed two halvings, and both rose dozens or even hundreds of times afterwards. On December 17, 2017, Bitcoin hit a high of $19,783.06.

After the third halving, the price of the currency did not rise as sharply as expected.

According to Coinmakertcap data, by May 14, the price of the currency had rebounded to $9,900, but did not break through the $10,000 mark. Since then, it has continued to fluctuate in the range of $9,000 to $10,000.

5.10-5.21 BTC price trend

"The halving is a certain fact that has already been digested in price expectations before it happens." Cai Kailong, a senior researcher at the Institute of Financial Technology at Renmin University of China, told the media that the halving effect is decreasing. At present, more than 80% of the 21 million bitcoins in the world have been produced. The halving at this time only means that the remaining small part of the unproduced output will be halved. As the output of bitcoins further decreases, the impact on the price of the currency will also shrink.

OKex's director of investment research, Mr. K, also believes that the "shoe drops" market earlier than the market generally expected, short-term speculators liquidated and left the market, the short-term hype bubble of the Bitcoin halving event was squeezed out, and the market has gradually recovered.

Although the expected bull market did not arrive immediately, the fact that the price stabilized at the $9,000 mark after the halving has surprised people in the industry.

Prior to this, many industry opinions believed that since the positive expectations had been released in advance, the price of Bitcoin would have a significant correction after the halving. However, this expectation was only confirmed two days before the halving. On May 10, the price of Bitcoin fell from around $9,800 to around $7,900, a drop of 24.31%.

Fortunately, the downward trend did not continue, and the price of Bitcoin gradually stabilized. Last week, the overall price increased by 10.36%, and then basically remained above US$9,500.

As for the reasons for the stable price of BTC, Zheng Di, founder of the Dots institutional investor community, told the media: "Buying and selling forces are in a stalemate. On the one hand, miners are constantly hedging, and some of the profits from previous bottom-fishing are being liquidated; on the other hand, overseas capital represented by GBTC (Bitcoin Trust) (half of which is American capital) is continuously buying."

Huobi Research Institute holds a similar view. It analyzes that there may be three reasons for the lack of callback after the halving. First, the large-scale issuance of USDT has a certain impact on the price of BTC. Second, this halving has a huge impact on the entire mining industry. Previously, many mining machines still had profit margins after the halving, but this time it is not the case. The profit of the mining industry has been greatly impacted. Therefore, for the interests of the mining industry itself, there is a huge motivation to maintain the price of BTC. Third, the digital trading giant Grayscale Fund has recently entered the digital asset market.

Whales are frantically absorbing funds, and exchanges are taking advantage of the situation to "withdraw funds"

The price performance of Bitcoin after the halving has brought to the surface institutional investors who have increased their holdings significantly.

On May 19, Grayscale Investments, a digital currency fund under Digital Currency Investment Group (DCG), announced that the total assets under management hit a new high of $3.8 billion. Among them, more than $3.3 billion is deposited in its flagship fund Bitcoin Trust "GBTC", and the proportion of institutional holdings is increasing, with 88% coming from institutional investors. In contrast, the proportion was 73% in the first quarter of 2019 and 66% in 2018.

From the on-chain data, it can be seen that in the month before the halving, the Grayscale Fund successively bought 37,000 bitcoins, which is equivalent to 70% of the mining output of the entire network during that period; on May 12, the day of the Bitcoin halving, the Grayscale Fund bought 3,716 bitcoins, far exceeding its production on that day.

Grayscale Q1 report: Institutional investors’ holdings increased

Another major investor is Cash App, owned by the US mobile payment company Square. According to statistics from Australian Bitcoin fund company ListedReserve, Cash App and Grayscale Fund purchased a total of 85,000 bitcoins in the first quarter of 2020, equivalent to 52% of the bitcoin production in the same period. The two companies absorbed 23.15% and 29.41% of the new bitcoins respectively.

“Currently, most of the new coins mined in the market are bought by these two institutions. Since they are greedy, they also support the market by resisting the selling of miners after the halving, preventing the market from falling sharply.” said a cryptocurrency practitioner.

Zheng Di believes that "GBTC's buying power has increased significantly, showing that overseas funds are optimistic about Bitcoin. Bitcoin is a barometer of global liquidity. To make money in trading, it is increasingly necessary to understand the global macro."

Another manifestation of whales' capital accumulation is the wave of "withdrawal" from exchanges.

According to the Bitcoin Exchange Net-Flow data provided by Glassnode, nearly 24,000 bitcoins have been withdrawn from exchanges since the Bitcoin block reward was halved on May 11. This means that investors are transferring the bitcoins purchased from exchanges to personal wallets.

Who is transferring? BeatleNews statistics show that since March 13 (the past two months), the BTC balance in the wallet addresses of major exchanges has dropped by 11.5%, but since April 23 (the past month or so), the number of addresses with a balance greater than 1,000 BTC has increased by 2.24%, which shows that whales are likely to be accumulating funds.

Mining difficulty decreases, miners are eagerly waiting for the flood season

In this Bitcoin halving event, miners are undoubtedly the group most directly affected.

On the day of Bitcoin halving, due to the halving of production and the lack of a significant price increase, mining pool data showed that more than 40 types of mining machines "lose money as soon as they are turned on." Miner Zhang Zhang was also forced to turn off his high-power machine. This is a choice that many miners have to make when electricity expenses exceed mining income in the absence of cheap electricity during the flood season to reduce losses.

Most of the shut-down machines are the Antminer S9 series mining machines, which were once the king of high cost-performance ratio. Antminer S9 has been a classic since its launch in 2016. During its peak period, its computing power accounted for about 70% of the total network computing power.

Li Kuang, the former co-founder of Bitmain, was in charge of the marketing and sales of Antminer. As he considered the halving in advance, Li Kuang did not own S9 and the same generation of models, and had already purchased the new S19 mining machine from Bitmain. For him, the impact of the halving was not obvious. He said, "In fact, it is just a halving of mining income, but this is in the plan after all."

It is an inevitable trend that new high-performance machines will replace old high-energy-consuming machines. In Li Kuang's view, for miners, this is a process of survival of the fittest, and mines with relatively high electricity costs and mining machines with high power consumption will gradually exit the market.

It has been more than a week since the Bitcoin halving. According to the data from the F2Pool mining pool, under the premise of unified electricity prices, nearly 30 machines that have reached the shutdown price are all old models of Ant series mining machines, Ebit series mining machines, Avalon series mining machines, etc. They have relatively large power consumption, and electricity costs account for more than 100%.

F2pool mining pool data: mining machine revenue decreases with power consumption

However, a new change worth noting is that the number of Antminer S9 series miners has surged this week. After the halving, the S9 computing power share once dropped to 18%, and has now recovered to 32%. In addition, according to CryptoQuant miner position data, miners are less willing to sell Bitcoin, and most miners are in a wait-and-see stage, which shows that the pressure on miners is at least decreasing.

The reduction in BTC difficulty and the upcoming flood season are seen as the main reasons for relieving pressure on miners.

On May 20, BTC completed its first difficulty adjustment after the halving. The difficulty of the entire network was reduced by 6.00% compared to before the halving. With the price of the currency unchanged, the unit computing power profit was adjusted to increase by about 6.4%, and a small number of mining machines will be turned on.

But Li Kuang believes that the reduction in difficulty is definitely good for miners and is also expected. Currently, the flood season has become the most concerned issue for miners.

Li Kuang told the media: "The flood season is usually in late May and early June. This year, the water came later. The S9 generation of mining machines that were shut down are being taken off the shelves, cleaned of dust, packed, and shipped to Sichuan. Although about 25-30% of the computing power is shut down, these mining machines can still be put online and run after the flood season comes, because the low electricity price during the flood season makes these mining machines revived again. If the coin price rises sharply after the flood season, I am afraid that S9 can continue to mine in the mine."

"Everyone is anxiously waiting for the water to come," he said. (Jiemian News)