The Bitcoin price is not something we have devoted huge amounts of time writing about over the last couple of years. Yes, when there has been price action we have covered it and there is certainly action again now. Bitcoins price sits at what many will see as the edge of disaster.
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Is Bitcoin on the brink of disaster. Miners leaving?
Bitcoin will be a roller coaster ride for the gamblers speculating on its price. This will remain the case for some time to come. Bitcoin is not a liquid asset and this fact makes huge price moves common. But are we at a point where a sub $1000 Bitcoin could become a reality and what would that mean. For many people in the space with some knowledge of how Bitcoin works a huge fear is that the mining of Bitcoin will become unprofitable. In very basic terms if miners close their doors and leave the space then Bitcoin could become vulnerable to 51% attacks as we have just seen with Ethereum classic. The current cost of an attack on Bitcoin in this manner is $270000 an hour, ethereum classics attack only cost the attacker $4500 an hour. The ethereum classic attackers got away with millions and damaged the reputation of the coin. Should Bitcoin miners leave enmass this type of attack, which can be viewed as someone cheating the system and stealing value, could create a situation where it is much cheaper to attempt such an attack. It is however highly unlikely as this type of attack requires another blockchain for the attacker to move funds to and given Bitcoin is the dominant blockchain this is unlikely. So what is the real issue for Bitcoin if miners leave enmass, not much in my opinion. Bitcoins blockchain doesn’t require the current level mining to keep it secure.
The cost of mining operations varies greatly. We have heard people say the cost of mining Bitcoin is $8000. It really depends on what equipment is being used and the cost of electricity. It is true some miners would have to have exited the market at $6000 others can easily sustain their efforts, even at a sub $1000 Bitcoin. People forget that as recently as 2016 Bitcoin was sub $1000. Personally, I think we will hear lots of stories and FUD, fear, uncertainty and doubt, about the collapse of mining, should the price continue its downward spiral and this more than anything will drive investors away, not the actual security of the network that mining provides, that should be just fine.
Will we see another Bitcoin Bull run
There is a real concern at the moment from those in the technical analysis community that Bitcoin could break below the 50-week moving average. Should this happen we would be in uncharted territory. We will keep you updated on this. You can read the thoughts of leading technical analysts in this article
Ok before we all pack up and go find something else to do let’s remember a few things. This price action is nothing new for Bitcoin, let hope the 50-week moving average is not broken though. Bitcoins liquidity causes huge price swings and my feeling is we will see a Bitcoin in the $1000 to $2000 range. What could very easily happen from there is a repeat of its previous behaviour and a massive surge upward, most likely after a consolidation period. There is lots of talk of large OTC, over the counter purchases and there is lots of truth to this but I think the big institutions are perched in the long grass waiting to pounce at a price that is too good not to buy in at, between $1000 and $2000 is my guess.
State-sponsored purchases of Bitcoin
There have been headlines around recently about Russia buying up Bitcoin. While I have not researched this extensively it does make complete sense to me that a government will make a large Bitcoin purchase if they have not already. The reason could be purely to make some money, drive the price up and dump it, why not? it happens with plenty of other commodities. Bitcoin lends itself to a state purchase. Securing it and doing it privately is easily done. There is also the rationale discussed at length in this article that Bitcoin offers a financial instrument superior to any other alternative to manage the looming global debt crisis. In short, you need to pay the debt back with something and presently the planet has 220 trillion in debt and total money supply of all currencies is 80 trillion, that’s a very big problem. I think we will see massive changes to the global financial system and a government signalling its interest or purchase of Bitcoin could see at a stratospheric rise in the price.
No doubt we are in for a wild ride over the next few years. The number of people in the ecosystem is doubling every year and more sophistication is present both from buyers and regulators. Bitcoin has every chance of being an accepted store of value in the near term and this would see a massive appreciation in its value.
Only the brave will be holding their Bitcoins at these prices, especially those that purchased in 2017. But what of the savvy investor who will be watching very closely now as the price goes back to pre-bull run territory. The usual suspects will once again trade well and make a fortune but mega fortunes could be made should Bitcoin go on another Bull run this year especially if spurred but institutional plays. What’s your get out or buy-in price?