Confession of a Bitcoin: The third halving will be a milestone event

Source: Bibi News

Hello everyone, I am a Bitcoin, I believe many human friends have heard of me. If the scope of species is large enough, I believe our family can also be classified as a species. Our family members are limited, only 21 million, so each of us is precious. Of course, most humans have only discovered our value in recent years. Now humans call us "digital gold" and want to dig us out and make friends with us.

01 Mining and halving

When Satoshi Nakamoto created us, he stipulated that whoever can find the solution to the hash puzzle first (there are many such solutions) will be rewarded with a part of us. The initial reward was 25 members of our family, and then it became 12.5. By May of this year, the reward will become 6.25. The reward will be halved about every 4 years. Those who are committed to finding a solution are called "miners", and the machines they use to find the solution are called "mining machines". The process of finding a solution and getting a reward is called "mining". Humans have discovered that every time the reward is halved, our price will rise, as shown in the picture below, so more and more humans regard us as an investment product.

Our prices fluctuate greatly (although they have become much more stable in recent years). Some of the people who invested in us became wealthy, while others lost all their money.

02 Halving Market Forecast

One of the greatest strengths of humans is that they like to find certainty in uncertainty. They study buying psychology, capital flow, market supply and demand, and want to explore our price patterns. The third halving is coming soon. This time, humans have also studied and predicted our price changes. The following views are very professional and interesting.

Jiang Zhuoer, founder of Litecoin Mining Pool:

The halving will come. Before and after the halving, the number of bitcoins that can be mined per day will be reduced from 1,800 to 900. This means that 900 BTC will be produced less per day. Based on the current price of 50,000 per bitcoin, it is equivalent to someone buying 45 million yuan worth of bitcoins every day, and it is a continuous net purchase.

Zhu Yu, co-founder of Biyin Mining Pool:

"Transaction fee ratio" refers to the ratio of transaction fees earned by miners in block rewards. This data represents the real activity of transactions on the Bitcoin chain. Currently, this value is at the bottom, far lower than the situation at the starting point of each round of market.

Blockchain venture capital firm Pantera Capital:

According to the efficient market theory, if everyone knows that the Bitcoin halving will occur, then the price of Bitcoin will most likely not rise as expected because the market has digested the information in advance.

However, Buffett once said, "The market is almost always efficient, but there is a difference of $80 billion between 'almost' and 'always'." Just because everyone knows something will happen, it doesn't mean everyone can make money, and people often ignore the opportunities around them.

03 Miners are hoarding coins

Because after the halving, miners have to spend more "effort" to get us, so now miners tend to hoard us, which is the same as hoarding masks before the outbreak of the new crown. Data shows that in 2019, miners' mining speed increased (probably to dig more before the price rises), and the average number of bitcoins mined by all miners per day was 50 more than expected. The number of bitcoins used by miners on the chain (these family members are used for the first time, and "use" here means selling, paying, etc.) tends to be less than the number of newly mined bitcoins. Miners are probably really hoarding coins.

04 Buying a new mining machine may be a good choice

Let's talk about mining machines. Mining machines consume electricity to help miners calculate whether a certain value is the solution to a hash puzzle. Each time such a calculation is performed, the lower the power consumed, the better the mining machine. This indicator is called power consumption ratio. Now more and more miners want to mine us. The competition among miners is too fierce, and their requirements for the power consumption ratio of mining machines are getting higher and higher. This year, not only will the mining rewards of miners be halved, but old mining machines with high power consumption ratios will also be replaced by new mining machines on a large scale, RIP. New machines are more efficient in mining, but they are also more expensive. How the price of Bitcoin will change is still unknown. Miners are in a dilemma. Should they buy new mining machines and when should they buy them? Here are some very professional voices.

Jiang Zhuoer, founder of Litecoin Mining Pool:

If you enter the mining market now, buying new machines can be an option. Bitmain's S17 series or Shenma's M20, M21S and other series mining machines have relatively low risks of recovering the investment in fiat currency, because there are still many S9s that have not been eliminated. These new machines will not be shut down for a long time.

Li Peicai, founder of Waiyi:

If you want to buy a new machine, the sooner the better. According to our analysis, new machines now have two characteristics. One is that the price of many new machines is close to the production cost. The other is that manufacturers do not have a large amount of inventory, so there may not be much room for price reduction in the future. In other words, no matter when you buy it, it may not be much cheaper than now. The advantage of buying now is that you can mine first and continuously reduce the holding cost of the mining machine.

As for old machines, if the price of the currency does not rise after the halving, machines with a power consumption ratio of more than 80W/T must rely on low electricity prices to survive, and they will probably face shutdown during the dry season.

05 Miners can use financial instruments to avoid halving risks

Humans are adding more and more financial methods to the mining process. The current scale of centralized cryptocurrency lending in China is at least $400-500 million, of which half of the users are miners. The digital asset custody volume of Matrixport, a cryptocurrency financial service provider, has exceeded $500 million; 80% of PayPal Finance's users are miners at most; 62% of Genesis Global Capital's loan balance in the fourth quarter is cryptocurrency. When the halving occurs, the mining rewards of miners are reduced, so miners have to bear greater financial risks. Financial tools can help them avoid some of the risks.

The most commonly used financial tools for miners are hedging and mortgage lending. If miners feel that the current Bitcoin price is too high, they can first borrow Bitcoin from the exchange, sell these Bitcoins at a high price in the market, and then gradually return the mined Bitcoins to the exchange. This is hedging, which can lock in profits in advance. If miners lack liquidity, they can mortgage Bitcoin to financial service platforms and borrow money from these platforms. The borrowed money is first used to pay electricity bills and buy new mining machines, and then repay the loan and interest and redeem Bitcoin. This is mortgage lending. Any financial tool has its pros and cons, and miners still need to pay attention to operational risks.

06 Conclusion

It has been 11 years since the birth of the first member of our family. Our family (and its derivatives) have received more and more attention from humans, and our ecology has become more and more abundant. We see more and more miners participating in mining, mining machines are being upgraded, the mining industry has derived new forms such as cloud computing power, miners are beginning to use financial tools to avoid risks, and even centralized countries and institutions are designing their own cryptocurrencies... In the future, the history of our family will be even more brilliant, and the third halving will definitely be one of the milestone events.