The newest Glassnode report focuses on the subject of the day: bitcoin mining. While bitcoin’s value has been suspiciously flat for some time, the problem adjustment got here in and registered an all-time excessive. Do the miners know one thing we don’t? Or is there a switch of energy happening behind the scenes? Glassnode poses a working principle on their newest The Week On-Chain. To start with, Glassnode places the problem adjustment into perspective:
“Bitcoin hashrate has reached a brand new all-time-high of 242 Exahash per second. To give an analogy for scale, that is equal to all 7.753 Billion folks on earth, every finishing a SHA-256 hash calculation roughly 30 Billion instances each second.”
The factor is, we’re in a bear market. The sentiment is fearful. There’s bother brewing in all places on the earth and bitcoin has been boring for some time now. What might be the rationale for a hashrate all-time excessive? Is it, as Glassnode theorizes, “a brand new dynamic as extra of the hashpower is held by higher capitalised publicly traded mining firms”? Or is it simply the sport principle behind bitcoin at work? Remember that mining income can be down and the associated fee to supply one bitcoin goes up in tandem with electrical energy costs.
Making the scenario extra unstable, the miner income’s bitcoin is at a low level. This “ought to, in principle, create elevated earnings stress on the mining business.” Add bitcoin’s steady costs to that equation and, what do we’ve? “It is extraordinarily uncommon for BTC costs to remain so stationary for lengthy, suggesting heightened chances of volatility on the horizon.”
Bitcoin Hashrate All-Time High | Source: The Week On-Chain
Bullish Signal: Bitcoin Hash-Ribbons Unwind
According to Glassnode, “the Bitcoin hash-ribbons commenced an unwind in late August, offering a sign that mining situations had been bettering, and hashrate was coming again on-line.” What does this imply and why is it bullish, although? “Almost all historic hash-ribbon unwinds have preceded greener pastures within the months that adopted.”
According to Glassnode, since bitcoin’s value continues to be flatlining, the “hashrate rise is because of extra environment friendly mining {hardware} coming on-line and/or miners with superior stability sheets having a bigger share of the hashpower community.” That’s the bottom of Glassnode’s takeover principle.
Glassnode Proposes “The Mining Halving” Concept
Another of their wild theories, Glassnode poses that “a 66% enhance in Difficulty and Hashrate since Oct-2020 corresponds to an approximate halving in income per hash.” And to help that, they supply these numbers: “the income earned per Exahash has been in a persistent and long-term downtrend, with the BTC-denominated reward presently at an all-time-low of 4.06 BTC per EH per day.”
So, if miners are getting destroyed by market situations, why is the hashrate recording all-time highs? The reply may lie with the Puell Multiple, “which is a cyclical oscillator that compares the present each day mining income to their yearly common.” According to this indicator, the mining enterprise is definitely gaining floor in opposition to earlier efficiency.
“The Puell Multiple hit the present lows of round 0.33 in June, indicating that miners had been incomes simply 33% of their yearly common income. It has since recovered to round 0.63, implying a level of stress aid, and adjustment to this new pricing regime.” According to Glassnode, this aid may imply that “a real bear market low is established.”
BTC value chart for 10/11/2022 on Bitstamp | Source: BTC/USD on TradingView.com
Glassnode Thinks There’s Still Capitulation Risk
Let’s be clear, bitcoin is strolling a tightrope for the time being. The market is about to interrupt and the pendulum might swing both means. Even although there are causes to be optimistic, the sensible investor ought to put together for the worst. “By quite a few fashions, we estimate that the common value of BTC manufacturing hovers just under present costs, such that any important value decline might flip an implied earnings stress, into acute and express stress.”
To assess the chance, Glassnode decided “the mixture measurement of miner balances” to 78.4K BTC. The homeowners of these reserves “could come below earnings stress,” however “It is extraordinarily unlikely this full quantity can be distributed.”
And that’s the place we stand for the time being.
Featured Image by Icons8_team from Pixabay | Charts by TradingView and The Week On-Chain