Bitcoin printed a new all time high of 137.6 exahashes per second on May 11th as the third block reward era came to a dramatic close amidst the coronavirus macroeconomic backdrop which took the price down 52% during the Black Thursday selloff, another $2,000 pre-halving selloff and a surprise endorsement from institutional investor hero, Paul Tudor.
Miners were likely looking to capitalize on the last few block of ‘easy’ Bitcoin mining before the block reward subsidy dropped from 12.5BTC to 6.25BTC per block, which contributed to the the largest recorded value for hashrate that we’ve seen yet.
Miners who were lucky enough to successfully mine these last few blocks of the 12.5BTC rewards era were sure to embed messages in these historic blocks and one of those messages included a stark reminder of why Bitcoin was started in the first place:
Mining Equipment Is Improving, Fast
The Antminer S17 has a hashrate of 53Th/s which is approximately 50% slower than the Antmine S19 which is scheduled for delivery starting next month. Every iteration of these machines proves more powerful and adds a significant benefit to the hashrate, they also require less electricity and for the most part run a bit more quiet than their predecessors.
The constantly improving hardware behind the Bitcoin network is why the hashrate never goes down, even if the same amount of miners are in the game. We’re currently seeing a lot of mining centralization in China, and while this does lead to certain vulnerabilities in the Bitcoin network, the main reason for this is that electricity is simply cheaper there at the moment, but as the mining equipment is constantly improving and Bitcoin gains popularity, this could change pretty quickly,
The Price Is Setting New Highs Since The Coronavirus Lows Of Mid March
Hashrate follows price, not the other way around, contrary to popular belief. Miners are not in the business of speculation, the process of purchasing machines, having them delivered, paying for the electricity to run then and then immediately selling the block rewards that are earned has to make financial sense in order for this arduous process to even start.
We’re seeing a fantastic price rebound from the low of $3,600 on March 13th. The math is starting to make sense again for miners to turn their rigs back on, or follow through on orders that they were about to place for new machines just before the Bitcoin price fell off a cliff on Black Thursday.
Coronavirus Economic Backdrop Is Exactly What Bitcoin Was Built For
A trillion here, a trillion there. We’re devaluing fiat currencies around the globe faster than you can say ‘hyperinflation’ and buyers are having legitimate issues purchasing gold. People honestly don’t even want to hand each other cash anymore cause the bills are likely laden with Covid-19 droplets.
In the United States alone, trillions of dollars have been created in stimulus efforts to mitigate the looming economic threat which decisively ended wall street’s longest bull run in history. Germany is boasting unlimited cash and the European Central Bank isn’t backing away from this fight either, as Christine Lagarde pledges a 750 billion euro commitment. All of this money being created devalues the rest of it in circulation, bringing to light Bitcoin’s provable scarcity principle.
The general population currently doesn’t understand why creating money at this pace is alarming economists, but when the signs of inflation start to show, wall street and main street will be seeking alternative ways to store their wealth.
Furthermore, Bitcoin is sitting dry powder – One major factor that moves the price of Bitcoin upwards is the price of Bitcoin moving upwards. The bull market that saw Bitcoin reach $20K in 2017 happened quickly, and it was mostly driven by FOMO. Once we cross $20K again it’s going to be a quick ride up with clear skies ahead. The current economic backdrop is exactly the spark that Bitcoin needs to explode.
Miner Output Selling Pressure Saw a Historic Drop With Yesterday’s Halving
Miner selling pressure is by far the most consistent type of selling pressure in the Bitcoin ecosystem, and with each halving we see a huge reduction in this key Bitcoin metric. The drop in monthly MOSP we just saw with yesterday’s halving was around $270,000,000.
The MOSP metric assumes that all Bitcoin that is mined is sold immediately by miners, which is a far cry from how things actually happen, as the most efficient miners do hold treasuries and look for the best opportunities to sell, but in reality mining is very expensive and more and more miners are being forced to sell their block rewards as they earn them just to cover the costs of their expensive operations.
|Halving Date||BTC/USD||Daily BTC produced||Monthly MOSP After each Halving||Price of BTC output Monthly Before Halving|
|May 2020||$10,000||1,800 to 900||$270,000,000|
(900 BTC * 30)
(1,800 BTC * 30)
|July 2016||$250||3,600 to 1,800||$35,100,000|
(1,800 BTC * 30)
(3,600 BTC * 30)
|Nov 2012||$12||7,200 to 3,600||$1,296,000|
(3,600 BTC * 30)
(7,200 BTC * 30)
MOSP is more relevant with the 2020 halving then it ever was previously. With the 2016 and 2012 halvings, most miners weren’t selling their Bitcoin immediately upon earning it because mining was simply cheaper. There are cases where miners even forgot about and threw away massive amounts of Bitcoin. In the most famous example ever, the first million Bitcoin to ever be mined has never moved.
Bitcoin Just Got A Taste Of The Worst Case Scenario
Years from now when talking about Bitcoin it will be hard not to mention the historic Coronavirus sell off (or Black Thursday) and the halving in the same breath as they are happening within a couple months of each other.
Bitcoin did very well in dealing with the Coronavirus sell off which saw the price tumble 52% and more on some exchanges, leading to a historically significant difficulty adjustment. There has been an immediate and consistent uptrend since the crash and at this point the price and key metrics have all recovered very nicely. The hashrate is continuing to challenge the all time high and transactions are showing a consistent and strong upwards trend to previous levels.
In as few words as possible, the state of the network is strong.
Some nightmare scenarios that bears are considering are a decrease in security due to miner capitulation post halving and a large sell off by weak hands causing the price to tumble below the $3K super support. The truth is that there are only strong hands left after the massive sell off sparked by the Coronavirus, anyone with Bitcoin after March 12th, 2020 is likely not selling it, even if it goes down to zero. The bottom is in.
As for the miner capitulation, this will certainly happen as the block rewards get halved, and only the more efficient operations will continue to exist. However, this won’t lead to a decrease in security as the new generation of mining hardware is simply much more powerful, and it’s being purchased faster than companies can produce it.
One great side effect of this is mining moving away from China which is mostly full of old generation mining rigs that will certainly have to shut off after the halving as they will become unprofitable to run. Even power plants are starting to mine Bitcoin and other operations that have surplus electricity are starting to get involved – this will ensure that there will always be enough hashrate to secure the network from bad actors.