Table of Content
Bitcoin Dominance, what is really going on?
Coinmarketcap.com is currently showing Bitcoin dominance at 70% This is up from 50% in April. Many commentators are however putting the figure at 90%
The problem with finding the real market cap is the amount of wash trading that happens. You can learn about wash trading here.
Market cap dominance also doesn’t take into account, liquidy. Many projects create pre-mined coins. Take for example a project that creates 100 million coins then does a trade of these coin at 2 dollars giving them an instant market cap of 200 million dollars. Ludicrous yes, and in reality, it skews the real data. Using what is called volume-weighted cap analysts are putting Bitcoin real dominance at 76%. When we remove stable coins from the equation, many analysts say this takes Bitcoin, BTC up to 90%!
Difficulty Ribbon, signalling the best times to buy Bitcoin
Vinny Lingham the South African Internet entrepreneur who is the co-founder & CEO of Civic – an identity protection and management startup, first noticed this back in 2014. It is known as the Bitcoin Difficulty Ribbon. When the ribbon compresses or flips negative, analysts like Willy Woo suggest this is best times to buy Bitcoin. The ribbon consists of simple moving averages on mining difficulty so we can easily see the rate of change in difficulty. You can read Willy’s excellent article on the subject here.
I like Willy and met both him, Tone Vay and Venzen Khaosan earlier in the year. These guys make some excellent content and it is a real pleasure to making some trading content with Venzen at the moment. We are producing YouTube shows for people new to Bitcoin and trading so make sure you check us out here. Venzen and I discuss the Bitcoin Difficulty ribbon in our latest video.
What is the Difficulty Ribbon?
It is really all about network mining difficulty and the impact of mining on Bitcoins price. Many factors influence the price of Bitcoin and in this case, it is a case of survival of the strongest miners. Yes, it is a complex topic and one that I will do my best over the coming videos and articles to try and help you with. I’ve ended up here as I’ve started to get my head around what mining is in terms of the economic model and how BTC differs from what is happening at Bitcoin SV, BSV. That is the focus of my next article. The reason I have started looking closely is I find it strange that people get excited about the perceived, likely or even given fact that Bitcoins price will go up as we approach the halving. The halving is a reduction in the block reward or how many bitcoins miners receive for securing the network with their hash power. Hash power is the computational output they provide. This has an electricity cost, more this later but in short average global electricity cost in terms of mining a Bitcoin is around 6500. I see this a well-defended price if we move much lower.
I’m doing my best to understand the economic model for the miners and likely outcomes next year as we approach the halving. I’m starting from a place of thinking how on earth is the halving a good thing for the miners who will lose half their reward. They will need a price twice what it currently is or a big increase in transaction fees. With one megabyte blocks and dwindling use of Bitcoin for transactions, I see a problem. With this in mind, my youtube show with Venzen will be focusing on block size, the halving and likely effects on Bitcoins future and its price. Make sure you subscribe and if you would like to join us in an episode get in touch.
As Willy Woo states in his article ‘the visualisation of network mining difficulty speaks to the impact of mining on Bitcoin’s price. As new coins are mined into existence, miners sell some of their mined coins to pay for production costs. This produces bearish price pressure.
The weakest miners sell more of their coins to remain operational. When it becomes unsustainable, they capitulate, hashing power and network difficulty reduces (ribbon compression), leaving only the strong, who sell less leaving more room for more bullish price action.
Typically we see this at the end of bear cycles after miners capitulate, the lack of miner selling pressure allows the price to stabilise and then climb; the classic accumulation bottom.
Breaking news in Craig Wright court case!
I flew to Canada to meet the Bitcoin SV team to better understand what they are doing. I also wanted to meet Craig Wright. I interviewed him while there and spent some time talking with him after the interview also. Of particular interest was his court case with the family of his best friend and business partner Dave Kleiman. I asked him about the case and I saw genuine sadness and pain. Kleiman died in very sad circumstances and I fully believe Wright is heartbroken by this. Today’s ruling is huge and has many implications.
Craig Wright must turn over half of his bitcoin holdings and intellectual property to the estate of Dave Kleiman. The judges ruling applies to holdings and IP from before 2014. Wright told me he had attempted to contact Daves father after the death and that he had not met Daves brother, Ira before. Dave Kleiman was a forensics expert and I don’t think he had the background to have worked significantly on Bitcoin. I am surprised by this ruling and from what I understand of the case I’m sure it will be appealed. I liked Wright in my time talking with him and I consider him a very intelligent guy most likely a genius. He is attacked so often in this space, mainly due to a personality that upsets many people and his claim to have written the white paper and to be Satoshi. There is a good body of evidence to support this in my opinion and how this ruling will affect peoples view of this claim will be interesting.
Magistrate Judge Bruce Reinhart recommended that plaintiffs be awarded 50% of the bitcoin that Wright held prior to Dec. 31, 2013, as well as 50% of the intellectual property that Wright owned prior to Dec. 31, 2013, according to an individual familiar with the case.
I will post my interview with Craig Wright in the coming days and also speak with people in the BSV camp for follow up content. Subscribe here to follow this story.