On-chain data shows that BTC computing power continues to decline. Can the United States' unlimited QE stimulate its rebound?

Since 2019, there has been a lot of discussion about the "halving market", and people hope that the bull market will start in the long-awaited 2020. However, affected by the epidemic, the global economy has suffered setbacks, and the beginning of the "production reduction year" is not optimistic. According to the OKLink blockchain browser data broadcast, the number of transactions on the Bitcoin chain has continued to decline for two consecutive weeks. The computing power of the entire network once fell back to the lowest level in nearly three months.

Compared with the previous high expectations, miners are wavering between leaving and holding on, and retail investors are also mostly on the sidelines, with few newcomers entering the market. According to the OKLink blockchain browser halving countdown page, there are only 50 days left before the Bitcoin halving. Is the halving market still worth looking forward to?

Bitcoin's hashrate drops, price cuts in half ahead of schedule

Looking back at the year 2019, although the price of Bitcoin has fluctuated like a roller coaster, the market sentiment has remained optimistic. This can also be reflected in the computing power of the entire network. According to the data statistics of the OKLink blockchain browser, in 2019, the computing power of the entire Bitcoin network showed a clear upward trend, and the annual computing power increased by 143.59%. It can be seen that there are many miners who have made arrangements before the halving in 2020.

Bitcoin network computing power trend from May 2018 to March 2020 (Image source: Internet)

As can be seen from the above figure, from January to March 2020, the total network computing power still maintained the upward trend of the past year. This is due to the lag in market regulation. The volatility of the global financial market caused by the COVID-19 pandemic has hit market confidence, and the cryptocurrency industry is no exception.

As we all know, China is the base camp for Bitcoin mining, and nearly 70% of the computing power of the entire network is controlled by Chinese miners. Due to the sudden outbreak of the epidemic and domestic prevention and control measures, some mines have stopped operating due to lack of maintenance. As the epidemic broke out one after another around the world, the economies of various countries have been hit one after another. Starting from March 8, the price of Bitcoin fell for many days, and on March 12 it fell below the $3,800 mark, setting the largest drop in nearly 6 years.

There was no halving as expected, only the price halved continuously. The continuous news of mining accidents has put pressure on the nerves of miners. Even when facing the flood season that came earlier than in previous years, many miners still chose to be conservative. Similarly, mining machine manufacturers who had already started the battle for the flood season at this time in previous years also chose a steady sales policy. It is reported that the shipments of several major mining machine manufacturers are not large, and the newly launched S19 series of the largest mining machine manufacturer Bitmain is only sold in China.

Overview of the recent situation of the reduced production coins

Among the digital currencies that have reduced production in 2020, ETC has already experienced a reduction in production at block height 10,000,000 at 02:07 pm on March 17, with the block reward reduced from 4 to 3.2 ETC (20% reduction).

In terms of price, which is of most concern to people, ETC has not performed as expected. Since January 2020, ETC has risen to above $13, and its price has increased by more than 200% compared with the beginning of the year. However, after setting a new high for the year, the price of ETC once fell to $3, a drop of 333% compared with the highest point this year. It has completely lost all the gains since the beginning of the year. ETC did not fire the first shot of the reduction of production coins.

The first quarter of 2020 is coming to an end. Is the halving still worth looking forward to? From April to May, BCH, BSV, BTC, and DASH will successively experience halving. For the specific halving time, please refer to the halving countdown page of the OKLink blockchain browser.

Image source: OKLink blockchain browser

Is there still hope for a year of production cuts?

In the long run, the scarcity and immutability of Bitcoin determine that it has a value foundation. Bitcoin is supported by computing power, and the output based on computing power competition guarantees its security. After the halving, the amount of new Bitcoin will drop to an annualized issuance rate of 1.7%. The current annualized inflation rate of gold is also around 1.7%. In terms of scarcity, Bitcoin is basically comparable to gold.

However, in the short term, the global spread of the epidemic is uncontrollable. The epidemic in China is nearing its end, but the global epidemic is already in the amplification stage, especially in Europe and America. They are unlikely to achieve the same results as China in the short term. In a crisis, people may sell non-cash assets and retain cash assets in a broad sense. In this case, even if the halving occurs, it may be seriously delayed. In fact, if we refer to the previous two Bitcoin halvings, the price increase also occurred after a delay of half a year or a year.

According to data from the OKLink blockchain browser, a difficulty adjustment is expected on March 26, and the difficulty coefficient will drop by 13.16%. Perhaps this will be a shot in the arm for miners who are struggling to move forward. After this difficulty adjustment, their earnings will see a slight correction.

Image source: OKLink blockchain browser

On the evening of March 23rd, Beijing time, the Federal Reserve announced a new round of large-scale rescue measures before the stock market opened, including unlimited bond purchases to keep borrowing costs low and plans to ensure that credit flows to businesses and state and local governments. Stimulated by this news, the three major U.S. stock index futures rose instantly, and Bitcoin rose by more than 10% in just two hours, from $5,800 to $6,600. As of press time, the price of Bitcoin remained around $6,500. Although the market is still fluctuating and market sentiment is not optimistic, the market is not a "bottomless pit." Behind the repeated shocks, it is not only people's little heart that is tested, but also people's grasp of dangers and opportunities.