Bitcoin Miners Will Determine Whether BTC Prices Will Steady Above $10,000
October 24, 2020 - Expert Commentary
A consistent performer.
A characterization many wouldn’t readily associate with Bitcoin.
In the past few months, close to 70 days to be precise, the price of Bitcoin has consistently hovered over the $10,000 mark at the close of trading. This is definitely not an aberration because Bitcoin has been steadily crystallizing the gains it made after the market crash in March.
So great has been the consistency that it has investors dreaming again. The last time prices were above $10,000 for this long was back in the Bull Run of late 2017. There was a subtle historic Bitcoin bull run at the time that you may or may not remember.
This is an impressive level of consistency. It is indicative of changes in investor trends and can be a positive omen for the future.
The Post-Pandemic Market
Bitcoin had a make or break year. After the prices cratered by more than half in March, many were ready to start writing Bitcoin obituaries.
The subsequent period was critical for Bitcoin. Few were certain that the coin would claw its way back to over the $10,000 mark that fast.
One significant development was the blockbuster stimulus packages governments like the US rolled out. The amounts of money that went out in the easing measures were truly striking. Investors who had an unshakeable faith in the equity market began to reassess their options.
The natural place to look at was gold and Bitcoin, assets that are not supplied by the government freely. The fact that Bitcoin prices have been this solid is likely an indicator that most investors who got into Bitcoin after the Pandemic crash have faith in this digital asset. If they were mostly speculative investors as it were in 2018, there would be a huge sell-off once prices went up considerably triggering yet another collapse.
Data from blockchain.com indicates that the number of registered Bitcoin wallets went up steadily since April. This increase in unique Bitcoin wallets is indicative of more people giving Bitcoin a serious look. When people were at home during the peak of the quarantine period, a good number decided to explore Bitcoin as an alternative asset.
This interest is a testament to Bitcoin’s draw power. This asset did not benefit from a government stimulus like equity markets, yet managed to more than double its value in the subsequent three months.
The minor bumps along the way were caused by issues like some DeFi projects going bust, and the traditional equity market having some pullbacks. Another significant price factor is the activity of miners.
Bitcoin Miner Trends as Prices Went Up
Miner activity and Bitcoin prices are two closely related phenomena. When prices are too low, miners using old equipment have to close up shop and wait for an uptick. As prices go up, more miners get in and start mining.
However, miners are also profit-seeking. Once the Bitcoin prices got over $11,000 a number of them started selling the Bitcoin they had in storage to make hay while the sun shined. Understandably, many miners had seen cycles where Bitcoin prices crossed the $10,000 mark, then reset back below again. This consistent run of prices above $10,000 is rather unexpected.
Therefore, miner sell-off above the $11,000 mark caused prices to reset below $11,000 in mid-October. Luckily, it wasn’t a reset big enough to cause significant panic.
Even though mining difficulty is at an all-time high, a lot of miners are incentivized to continue because of the high Bitcoin prices. However, miners using old equipment are struggling with the difficulty adjustment.
New-generation equipment that VBit Technologies provides is more efficient and allows a miner to remain profitable all through. Bitcoin prices are still up more than 15 percent in the third quarter of 2020.
The Prevailing Financial Climate
2020, in general, has been an unpredictable year. For investors in the equity markets, the uncertainty is palpable. At the height of the financial crisis after the Covid crash, there was a record amount of cash on the sidelines waiting to further developments. Even Warren Buffet, who is famous for doubling down on stocks after the 2008 crash, decided to sit out for a while.
Besides, the Federal Reserve has had a policy of near-zero interest rates for more than a year now. In an interview with Bloomberg, Mike Novogratz identified this, and central banks jamming the markets with liquidity, as the reasons why many investors look at assets like Bitcoin favorably.
Bitcoin benefits and Ethereum have had a good few months. Ethereum has seen a boom because the DeFi markets attracted historic liquidity, with ETH prices benefitting from these headwinds. Some of these projects also keep collateral in Bitcoin, explaining the mutual benefit for the cryptocurrencies.
It will be interesting to see where the speculative frenzy in Bitcoin leads. If there is a big correction, Bitcoin may take a slight hit.
In general, people are more receptive to cryptocurrencies. Some DeFi projects have names that sound a little exuberant; Sushi, Spaghetti, Whale. They definitely require some confidence to invest in.
Traditional speculative investors who got tired of Bitcoin are looking at these shiny objects favorably. Bitcoin is no longer the speculative force it once was. Instead, the pioneer cryptocurrency is attracting institutional investors and those looking for a store of value of sorts. In this new turn of events, Bitcoin is in a relatively secure position.
Cryptocurrency is here for good. Bitcoin has gotten a level of legitimacy and is safe to say we have crossed the Rubicon. Other new cryptocurrencies will continue to drive speculation while Bitcoin remains a reserve currency of sorts.
How Miners Will Respond
It is usually difficult to have a pinpoint prediction for cryptocurrencies. Miners who were to sell-off Bitcoin at the $10,000 mark have probably done so. This means that unless there is an indication of a great correction coming up, miners will likely sit on the Bitcoin they have for a while.
Bitcoin fundamentals look decent. The network went through a successful halving event without problems. Moreover, the circling of institutional investors around the coin bodes well for the stability of Bitcoin prices.
Therefore, it is hard to envision a sudden Bitcoin sell-off, comparable to that of 2018. Apart from gold, no other asset in the market seems to have the intangibles Bitcoin has. This bodes well for prices, and the stability needed by investors.
Mine Bitcoin with VBit
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Data centers located in areas of North America with natural cooling further help to lower the maintenance cost.
The equipment you purchase is yours and you can order shipping at any time. The hosting is only because mining Bitcoin solo can be inefficient. The hosting service that VBit offers takes care of the cooling and power logistics that can make mining at home a nightmare.
Mining Bitcoin becomes simpler and more optimized in such a professional setting. You have a glorious chance to start mining when Bitcoin may be on the cusp of another historic market rally.
The consistency in Bitcoin prices is great for miners, especially in the coming months.
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