Blockchain Industry Weekly Report | Production cuts are coming, opportunities or challenges?

Introduction

2020 is an important year of production reduction in the history of digital token development. Many mainstream tokens represented by BTC will see production reduction.

summary

Special topic: Is the production cut coming? Is it an opportunity or a challenge? In 2020, the seven major mainstream tokens ETC, BCH, BSV, BTC, DASH, XZC, and ZEC will successively experience production cuts. At present, ETC, BCH, and BSV have completed production cuts. Since BTC has seen a magnificent bull market after each halving, the market has strong bullish expectations for the production cuts of mainstream tokens. The market may usher in a bull market again with this round of production cuts, thereby bringing huge profits to miners. At the same time, due to the uncertainty of BTC price increases, miners also face huge risks. After the block reward halving, BCH and BSV experienced a loss of computing power.

Market: With the arrival of production cuts, the market continues to fluctuate upward. This week, the total market value of digital tokens is 200.28 billion US dollars, an increase of 6.82 billion US dollars from last week, an increase of about 3.5%; the average daily turnover rate is 64.7%, an increase of 0.5% from last week. BTC is currently priced at 6,865.49 US dollars, a weekly increase of 2.0%, and an average daily trading volume of 38.5 billion US dollars. ETH is currently priced at 158.41 US dollars, a weekly increase of 11.5%, and an average daily trading volume of 16.6 billion US dollars. This week, the exchange BTC balance is 683,000, an increase of 4,895 from last week. The exchange ETH balance is 14.978 million, an increase of 118,000 from last week. Among the BICS secondary industries, the proportion of project service industry has increased significantly.

Output and popularity: BTC computing power has increased significantly. The mining difficulty of BTC this week is 14.72T, up 0.8T from last week, and the average daily computing power is 109.9EH/s, up 8.1EH/s from last week; the mining difficulty of ETH this week is 2247.4, up 21.99 from last week, and the average daily computing power is 174.8TH/S, down 2.3TH/S from last week.

Industry: Industry standardization is inevitable. "Bitcoin Evolution" is using members of the British royal family to commit fraud; Kraken Business Development Director: After halving, the BTC network security model may need to be adjusted; British company paid nearly $2.3 million in BTC to hackers after being attacked by ransomware.

Risk warning: regulatory policy risk, market trend risk

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1. Production cuts are coming, opportunities or challenges?

2020 is an important year of production reduction in the history of digital token development. Many mainstream tokens represented by BTC will see production reduction.

Production reduction, that is, halving the block reward, is a measure taken by Satoshi Nakamoto to control the total issuance when designing the economic model of BTC. This mechanism is not only inherited by BTC's forked tokens such as BCH and BSV, but also imitated by many PoW consensus tokens.

1.1 Production reduction = price increase?

In 2020, the seven major mainstream tokens ETC, BCH, BSV, BTC, DASH, XZC, and ZEC will experience production cuts in turn.

On March 17, ETC took the lead in reducing production, and the block reward after the reduction was reduced from 4 ETC to 3.2 ETC; on April 8, BCH ushered in a production reduction, and the block reward was reduced from 12.5 BCH to 6.25 BCH; on April 10, BSV completed the production reduction, and the block reward was reduced from 12.5 BSV to 6.25 BSV.

The market has a strong bullish expectation for the reduction of production of mainstream tokens because there has been a magnificent bull market after each halving of BTC. Taking the BTC production reduction cycle of about four years as a cycle, the BTC market can be divided into four stages: overheating period, recession period, recovery period, and expansion period.

As shown in the above figure, blue, brown, pink and green represent four different stages. BTC prices tend to rise rapidly after halving and enter an overheating period. BTC rose 92.19 times in 368 days after the first halving and 29.39 times in 525 days after the second halving. Before the halving, it was a recovery and expansion period, when the market emerged from the shadow of the bear market and rebuilt confidence.

At present, ETC, BCH and BSV have completed production cuts one after another, and there is still about a month before BTC production cuts. Previously, due to the COVID-19 pandemic and other reasons, the market has experienced a downward adjustment and bottoming out, and the market may usher in a bull market again with this round of production cuts.

1.2 Loss of computing power caused by production reduction

The reduction in block rewards means that miners’ income will decrease while the token price and cost remain unchanged, so miners will also adjust the distribution of computing power according to market conditions.

After BCH and BSV underwent their first block reward halving in history, the block rewards were reduced from 12.5 to 6.25. For miners, their income was cut in half while the token price and cost remained unchanged, resulting in a loss of computing power.

The day after BCH’s production cut, the computing power dropped from 3.51 EH/S to 2.97 EH/S, and once dropped to 0.96 EH/S. During this period, the computing power of the BTC and BSV networks increased gradually. The day after BSV’s production cut, the computing power dropped from 3.09 EH/S to 0.85 EH/S, while the computing power of the BTC network continued to increase.

However, influenced by the market's perception that halving is a good thing, the price of BCH rose by nearly 20% and the price of BSV rose by more than 30% in the week before the production cut. The short-term rise in the price of the token reduced the losses of miners to a certain extent. Before BTC halved, some flexible miners chose to switch their computing power to BTC, taking advantage of the nearly one-month time difference of BTC halving to obtain more block rewards.

1.3 Opportunities and Challenges Faced by Miners

After each halving of BTC, there has been a magnificent bull market. In 2020, the crypto asset market will see a reduction in the production of many tokens, which may push the market to usher in a long-awaited bull market again, thereby bringing huge profits to miners.

At the same time, miners also face huge risks because with the arrival of halving, there is uncertainty about the rise in BTC prices, but the decrease in block rewards for mining after the reduction is certain.

The mining industry is a capital-intensive industry with high fixed costs and large operating leverage. When the block reward is halved, the mining income of the mining machine will decrease. When the daily mining income of the mining machine is less than the variable cost (electricity cost + operating expenses), the mining machine will shut down. The profit of the mining machine is severely squeezed, which directly leads to a significant increase in the shutdown price of the mining machine. At the same time, it will extend the payback period of the mining machine. Some mining machines will not even be able to pay back the cost, and miners will face huge losses.

2 Market: With the arrival of production cuts, the market continues to fluctuate upward

2.1 Overall market: With the arrival of production cuts, the market continues to fluctuate upward

This week, the ChaiNext Digital Asset 100 Index closed at 627.07 points, up 3.4%, and the ChaiNext Digital Asset 100X Index closed at 1677.29 points, up 6.9%.

The total market value of digital tokens this week was US$200.28 billion, an increase of US$6.82 billion from last week, an increase of approximately 3.5%.

The average daily trading volume of the digital token market was US$133.37 billion, up 11.9% from last week, and the average daily turnover rate was 64.7%, up 0.5% from last week.

This week, the BTC balance on exchanges was 683,000, an increase of 4,895 from last week. The ETH balance on exchanges was 14.978 million, an increase of 118,000 from last week.

The market value of USDT is 6.37 billion US dollars, up 189 million US dollars from last week, and the premium rate of USDT relative to the US dollar has increased.

2.2 Core Tokens: Mainstream Tokens Continue to Reverse

The current price of BTC is $6,865.49, with a weekly increase of 2.0% and a monthly decrease of 13.2%. The average daily trading volume is $38.5 billion, and the average daily turnover rate is 29.7%.

The current price of ETH is $158.41, with a weekly increase of 11.5% and a monthly decrease of 18.7%. The average daily trading volume is $16.6 billion, and the average daily turnover rate is 93.1%.

The current price of EOS is $2.5, with a weekly increase of 6.8% and a monthly decrease of 18.3%. The average daily trading volume is $3.36 billion, and the average daily turnover rate is 140.6%.

The current price of BCH is $233.09, down 1.2% from the previous week and 12.7% from the previous month. The average daily trading volume is $4.04 billion, and the average daily turnover rate is 88.3%.

The monthly volatility of major tokens remained basically unchanged this week, and price fluctuations were still large.

2.3 BICS industry: The proportion of project service industry has increased significantly

Among the top five BICS (Blockchain Industry Classification Standard) secondary industries by market capitalization, the market capitalization share of the project service industry has increased significantly, while the market capitalization share of the healthcare industry has decreased significantly.

The BICS secondary industries with the most significant growth in the number of tokens this week were payment settlement, and leisure and entertainment, while the most significant declines were in information technology and healthcare.

2.4 Market view: The market went down after the production cuts, ending the rebound

This week, BTC hard forked BCH and BSV and saw a sharp drop after the reduction in production, which also led to a decline in the overall mainstream tokens, ending the previous rebound. At the same time, the Byzantine Generals Problem caused market speculation on whether crypto tokens could change the 51% attack theory.

The short-term bottom may have been reached, but the market is volatile, so you still need to pay attention to controlling your positions. The BTC halving is approaching, and the recent volatile market has provided investors with a more suitable price. It is still a good time to invest in BTC and other digital assets. Long-term holders can consider fixed investment or buying on dips.

3 Output and popularity: BTC computing power has increased significantly

BTC computing power has increased significantly. The mining difficulty of BTC this week is 14.72T, up 0.8T from last week, and the average daily computing power is 109.9EH/s, up 8.1EH/s from last week; the mining difficulty of ETH this week is 2247.4, up 21.99 from last week, and the average daily computing power is 174.8TH/S, down 2.3TH/S from last week.

This week, Google Trends statistics show that the search popularity of Bitcoin is 13, and the search popularity of Ethereum is 11.

4Industry News: Industry Standardization is Inevitable

4.1 Bitcoin Evolution is using members of the British royal family to commit fraud

According to Cryptoglobe, a new BTC scam has emerged that uses a fake BBC report based on Prince Harry and Meghan Markle to implement its crypto token fraud scheme. The ad claims that the royal couple discussed the "wealth loophole" on a TV show that can "turn anyone into a millionaire in three to four months." They are using crypto tokens to achieve "financial independence" and withdraw from their duties as royal family members. The ad lures users into a crypto trading program called "Bitcoin Evolution" and tells investors that they can "become the next millionaire."

4.2 Kraken Business Development Director: After halving, the BTC network security model may need to be adjusted.

According to AMBCrypto, Dan Held, director of business development at Kraken Cryptocurrency Exchange, said that in the next 30 days, BTC will experience its third block reward halving, which may have an impact on security. He pointed out: "In the long run, the security of BTC is the most important, and whether its security model can withstand attacks. One of the core parts is to focus on block rewards, which are composed of block subsidies and transaction fees. We should review whether transaction fees will replace block subsidies in a meaningful way and whether they are sufficient to ensure the security of the network." Held emphasized that when it comes to BTC and cryptocurrencies, users will always turn to more secure blockchains.

4.3 British company paid nearly $2.3 million in BTC to hackers after ransomware attack

According to Cointelegraph on April 9, London-based Travelex paid hackers nearly $2.3 million in BTC after suffering a ransomware attack on January 11. Travelex confirmed the attack to the media shortly after the incident. However, they did not disclose that they paid a ransom of about 285 BTC after the system was offline for several weeks. The attack, called Sodinokibi (or "REvil"), is a malware attack that began leaking stolen data from multiple companies including CDH Investments and the above-mentioned London company earlier this year. Earlier on January 8, Travelex was infected with ransomware and hackers demanded $6 million worth of BTC.

Notes:

Due to some reasons, some of the terms in this article are not very accurate, such as: token, digital token, digital currency, currency, token, Crowdsale, etc. If readers have any questions, please call or write to discuss.

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