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Bitcoin [BTC]’s mining death spiral explained by BlockTower’s CIO, Ari Paul




Source: Unsplash

Ari Paul, the managing partner, and Chief Investment Officer the BlockTower capital spoke recently on TD Ameritrade’s Morning Trade Live on Monday and discussed Bitcoin’s declining hash rate over the past few months. He also addressed the ‘mining death spiral’ that Bitcoin is facing.

Touching the shutdown of Bitmain’s Israel’s mining branch, Ari Paul said that it was a matter of intense debate as the security of Bitcoin’s network lies in the hash power and in turn, lies with miners. He added, “the more hash power, the more expensive it is to mine, the more secure the network is” so the danger arrived when the mining cost declined.

Paul continued:

” it’s tricky because it’s a spectrum, ’cause there’s some miners who have near zero marginal electricity costs and there are others for money a $4,000 marginal cost”

He argued that $6,000 to $6,500 was not the mining cost, and said that it could be an all-in cost, which includes the equipment cost, replacement of ASICs, but not the marginal cost.

Referring to the mining fee revenue chart, and how it has vastly reduced to a point where it is not profitable for miners, Ari Paul said:

“The term that people sometimes use is “hash power death spiral” and the idea’s that if the price of bitcoin falls below marginal cost of mining, miners just stop mining, and the Bitcoin network ceases to function, basically. But the Bitcoin network automatically adjust for this every it’s usually around two weeks, it’s it’s algorithmic.”


Paul added that the way the Bitcoin network worked was that the difficulty of finding the next block adjusts automatically and that this was “baked in the code” every 2016 blocks.

The concern that Ari Paul raised was that if Bitcoin’s price fell down to zero in a dramatic decline, it would require an entity like Coinbase or BlockTower to mine Bitcoin for a period of two weeks or to mine those 2016 blocks which would act like a “bridge loan”.

Furthermore, the mining done in the period of those two weeks would adjust the mining difficulty level which would offset the drop in the hash rate, leading the mining from that point on to be profitable.

Moreover, Paul added that for the brief period of two weeks that the miners are mining uneconomically is not actually right as it was semantics and that they just have to be profitable at the end of two weeks, which usually came from inflationary block reward.

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Akash is your usual Mechie with an unusual interest in cryptos and day trading, ergo, a full-time journalist at AMBCrypto. Holds XRP due to peer pressure but otherwise found day trading with what little capital that he owns.


Bitcoin [BTC] will take another 22 years to regain its all-time high, says research analyst

Akash Anand



'Bitcoin [BTC] will take another 22 years to regain its all-time high', says research analyst
Source: Pixabay

Bitcoin [BTC]’s rise and fall has been a consistent event that has grabbed headlines in the cryptocurrency space. According to the latest financial analysis conducted by UBS research analyst Kevin Dennean, the fans of the cryptocurrency will have to wait for over 22 years to climb back to its earlier heights of $19,000- $20,000.

Dennean made these claims comparing the pattern of Bitcoin and the cryptosphere with the trends of other financial system crashes like the Dow Jones crash of 1929, the NASDAQ slide in 2000 and the Oil tumble of 2008. The UBS analyst pointed to how a lot of the cryptocurrency’s proponents stated that Bitcoin is en route to a bull surge because ‘other assets did that in the past’. He laid the foundation for the delayed rise of Bitcoin by saying:

“We’re struck by how long it took other asset bubbles to recover their peak levels (as long as 22 years for the Dow Jones Industrials) and how pedestrian the annualized returns from trough to the recovery often are.”

Dennean was also of the opinion that not every bubble that bursts recovers its old highs, taking the example of the Nikkei crash, which after 30 years of its fall, has still not managed to reach its earlier peak, currently trading at around half its all-time highs. The Japanese asset price bubble was an inflated economic bubble in the late 80s where the real estate and the stock market prices were greatly volatile. In 1992, the price bubble burst and Japan’s economic machine came to a standstill.

Another figure used by Dennean was the fact that all the asset classes, including Bitcoin, fell by 75 percent with Bitcoin breaching the 80 percent barrier. After the crash, only the Dow Jones and the NASDAQ provided a reprieve to users after rising back to its earlier highs.

At the time of writing, Bitcoin was trading for $5292 with a market cap of $93.423 million. The 24-hour trading volume was clocked at $12.985.

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