Thriller Insights - S3EP19: The Bitcoin Crash Explained and Whats Ahead

  
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First we need to acknowledge that Bitcoin wasn't sold because it stopped working or because it was 51% attacked. It hasn't lost its market share either in speculative interest. People are still purchasing Bitcoin at its current price of $5K. Soon USD will be pumping again especially when lower interest rates and more stimulus kick-in this week from the FED. But make no mistake this is an orchestrated crash of all markets. The stops in supply chain and industries is creating this Recession possibly turning into a Depression especially with all the panic and hysteria going on in the mainstream news.

So what happened…

It just happened to be caught in a temporary selling frenzy that affected other assets as well. This is the both positive and negative affects of institutional investors entering the industry. Thus, the recent selling is really not due to any breakdown in Bitcoin fundamentals. When this ordeal is finally over, we can expect Bitcoin to get back to where it was before along with equities. But of course, due to Stock to Flow Bitcoin will continue climbing with greater impetus than equities over the longer term.

Coin Analysis: Bitcoin

What are the ramifications of the crash…

Bitcoin & Crypto industry is going to go through a world of hurt. Look for Project layoffs soon to occur, mass liquidation of alt-coins is imminent. Now is not a time to buy alts for speculation. Also expect some companies in the industry not to make it out alive. Further drops in price will likely occur in the Bitcoin market pre and post halvening.

Will need to watch the Miners the next few weeks as hash rates continue to increase and the price of Bitcoin drops. Profitable mining becomes a major problem very soon at these levels.

$4800 becomes the key resistance level…heres why.

If we break $4800 the next free fall is to $2800. This is still a possibility. The Energy Value model states that if all miners were to stop mining Bitcoin tomorrow, the power input would be zero and Bitcoin would be worthless.

The power required to fuel Bitcoin mining is driven by two parts, the hash rate to solve the SHA-256 algorithm and the energy efficiency of the mining hardware itself. In its early years, Bitcoin was mined on very electrically inefficient CPUs and GPUs.

The current era ASICs have energy efficiencies over 100,000 times greater than the average Bitcoin mining hardware of 2009. This means that a higher relative portion of the average miner’s electrical bill today is efficiently converted into hashing power.

To estimate a historic profile of Bitcoin mining hardware Energy Efficiency, the efficiency rates for 150 Bitcoin hardware models from Cambridge (ASICs only), BitcoinWiki (FPGAs) and Bitcoin.it (ASICsCPUs and GPUs) were collated. All ASICs, FPGAs and Intel, AMD and Nvidia hardware were considered where Energy Efficiency (J/GH) was provided and where an estimated hardware release date was found. Common models were grouped and the average energy efficiency for that model calculated on an equal weight basis.

The daily energy efficiency of the Bitcoin network was then calculated as the equally weighted average of all hardware which was within 2 years of its release for CPUs/GPUs/FPGAs and within 1.5 years of its release for ASICs. This difference in depreciable lifespan was chosen because:

  • The hardware within model groups for CPUs and GPUs generally span several years

  • Bitcoin mining was generally less competitive in its early years

  • Other research also suggests a 1.5 year depreciation lifespan is typical for ASICs in more recent years

Finally, a 1 month moving average of Energy Efficiency was calculated to allow for the phase-in and phase-out of model types.

In reality, some hardware models had wider usage and some longer lifespans. However, at risk of increasing the historical error in the Energy Value model and in attempt to produce an unbiased outcome, no other hardware exclusion logic, data cleansing or data manipulation was conducted.

Investors and speculators threw in the towel well before Bitcoin Miners in all of Bitcoins three major price crashes of over 80% this past decade. In 2011, 2014 & 2018. Hash rates declined following price declines…will that happen again in 2020?

Future Predictions:

What to expect next…

I think, short-term, definitely Bitcoin is going to go down all the data is pointing in this direction. People need to withdraw that money. Also as the market trades down, people get more fearful and they'll be selling more Bitcoin and move it over to fiat to withdraw. In plain speak its a domino effect. Retail investors get more fearful and then as Bitcoin falls in value, people will wonder if Bitcoin is or isn't a store of value. Which continues to more and more selling. Rinse and Repeat.

Possibly lets play this out…

Everything right now in the Bitcoin & Crypto media is negative, “The Death of Bitcoin” headlines have been replaced with “Bitcoin is not a Store of Value?” when $1K drops do not happen in a week but in a day, and finally when the market has already dropped between 25–80% since the all-time high, intrinsic value and other key metrics can the fog lights through the heavy storm.

The Bitcoin hash rate is the only one metric we have. It is relatively smooth compared to price and offers clarity on the Bitcoin market.

According to Hash rate we are falling if this continues…expect further trend downwards in price.

Key Take Aways:

  • 25% Chance. We might have just hit the reset button on Bitcoin & Crypto. Meaning this is 2010 all over again.

  • Fed will lower interest rates in March. Fed's next monetary policy meeting is on March 18. Will be looking at Bitcoin closely this week.

  • The health of the mining network is intrinsically linked to Bitcoin’s value. We must hold $4800.

  • We need to watch Miners and what they do. Can they remain profitable will be crucial. Key level to watch is $2800.

  • Next few weeks will be absolutely critical to the Bitcoin & Crypto industry going into the halvening.


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