The new story after Bitcoin's "halving": ETH whales turn to BTC, and miners face a life-and-death test

In the early morning of May 12, Bitcoin successfully completed its third "halving" in history, and one of the biggest events in the cryptocurrency world this year came to a temporary end under everyone's witness. However, its subsequent chapter has just begun.

After the halving, the market situation and on-chain data have changed: the price of Bitcoin has risen a lot, the computing power and hash rate have dropped sharply, the income of miners has plummeted, and Ethereum whales are turning to BTC. What new stories will these new changes bring us? What impact will they have on the market structure?

Mining industry faces a big test

Two days have passed since the halving, and the price of Bitcoin has been on a steady upward trend, with a surge in the early morning of May 14. As of 17:30 on May 14, Bitcoin rose 9.21% in 24 hours and is currently trading at $9,705. The current price of Bitcoin remains above the 10-day and 50-day moving averages, which is a bullish indicator technically.

Bitcoin price trend since May 13

The mining industry is the first to be affected by the Bitcoin halving. Although the current Bitcoin price has risen, the current price is still not enough to maintain the operation of most old mining machines, and miners and mining farms are still facing huge challenges.

After the "halving", the total computing power of the Bitcoin network dropped from 122 EH/s to 102 EH/s, and the Bitcoin block reward was reduced from 12.5 to 6.25, and the mining income of miners was directly reduced. According to the data of the Tokenview block browser, the mining income on the first day of the Bitcoin halving (1022.31 BTC) was 46.22% lower than the previous day. Converted into US dollars, the mining income on the first day after the halving was approximately US$8.978 million, a decrease of approximately US$7.6614 million from the previous day, a decrease of approximately 46.04%.

In the short term, this will lead to another reshuffle in the mining industry, ushering in a passive elimination from the bottom up, increasing industry concentration and making the head effect more obvious.

First of all, a large number of old mining machines on the market are unprofitable, and more than 60 mining machines are facing "losses" and shut down. Among them, there are many star products of the three major mining machine manufacturers, Bitcoin Mainland, Canaan, and Ebang International, including old models of Ant series mining machines, Ebit series mining machines, Avalon series mining machines, etc. In this process, it is an inevitable trend for high-performance new machines to replace high-energy-consuming old machines. For miners who use old mining machines or have no advantageous conditions, their survival will become very difficult, and they will most likely be eliminated in the future.

Secondly, according to Shao Jianliang, general manager of Canaan Technology's Blockchain, the pace of institutional layout of Bitcoin is accelerating. Overseas institutions in the United States, Canada and other countries continue to set up mining funds and build mining farms. With the continued layout of institutions, the degree of specialization in the mining industry will become more and more obvious, and the pace of market clearing will further accelerate. Mining farms whose comparative advantages are not obvious enough and whose degree of specialization is not high will also face greater competitive pressure.

This series of impacts on miners and the mining industry is the source of market discussions and concerns about the "death spiral" and the impact of selling pressure caused by miners on coin prices.

However, there are also some positive indicators changing in the market.

ETH whales are moving to BTC

Glassnode’s latest report shows that despite the halving of Bitcoin’s miner rewards, the health of the Bitcoin network is close to its maximum. Concerns about a “death spiral” are not too worrying, as the BTC hash rate fell after the halving but has recovered quickly.

David Lifchitz, chief investment officer at quantitative crypto trading firm Exo Alpha, said stable trading volume indicates the health of the market and whether Bitcoin can continue to appreciate after the halving.

Coinbase spot trading volume over the past three months. Source: Skew

Lifchitz believes that "over time, the increase in scarcity of an asset makes it more valuable, but only if there is still demand in the market." So far, the value of Bitcoin has been increasing, and Bitcoin has also outperformed some traditional assets. The market performance of Bitcoin and traditional assets also proves his point. On Wednesday, Bitcoin beat the S&P 500, and the large-cap index fell 1.75%. Cryptocurrencies have also performed better than gold. So far this year, Bitcoin has risen 27%, gold has risen 13%, and the S&P 500 has fallen 12%.

In addition, data shows that whales holding Ethereum may be entering Bitcoin.

On Tuesday, the seven-day average of addresses holding 10,000 or more ETH (known as “whale” addresses) fell to 1,050, down nearly 6% from the December high of 1,115. This is the lowest level since January 2019, according to Glassnode data.

Seven-day average of addresses holding 10,000 ETH or more. Source: Glassnode.com

The decline in the number of ETH whale addresses is in stark contrast to the recent increase in the number of Bitcoin whale addresses. As of the end of April, the seven-day average number of addresses holding more than 10,000 BTC increased to 111, the highest level since August 2019.

Connor Abendschein, crypto research analyst at Digital Assets Data, said: “Some ETH whales may have entered BTC as they expect the price of Bitcoin to rise due to the impact of the mining reward halving.”

In the past few months, analysts have widely discussed the "halving" event, and the market is very bullish, although there is also a hype component. Bitcoin quickly recovered to $7,000 in just five days after falling to $3,867 on March 12, further strengthening investors' bullish expectations. This may have caused some whales to convert Ethereum to Bitcoin before the Bitcoin "halving".

This is further evidenced by the fact that the number of large addresses for BTC surged by 5% in March, while the number of addresses for ETH showed a downward trend.

The popularity of Bitcoin has been rising recently, but the activity on the chain is not very high. This has a lot to do with the overall market environment this year and the 312 incident that cleaned up a large number of investors. However, now that Bitcoin has experienced its third "halving", its status is somewhat different from before.

On the one hand, we are about to see a reduction in the supply of Bitcoin, and the scarcity value of Bitcoin will continue to rise; on the other hand, in addition to the speculative demand and storage demand of market investors, the inflation hedging demand and institutional fund hedging demand of Bitcoin are increasing.

How will Bitcoin develop in the future and what new stories will unfold? We will have to wait and see.

Reference link: https://www.coindesk.com/market-wrap-some-miners-face-an-uncertain-future-despite-rising-bitcoin-price

https://www.coindesk.com/many-ether-whales-might-be-leaving-for-bitcoin-data