Thursday, June 28, 2018

BTC Price Falling Again. Will We See The Chain Death Spiral This Time?

Another Bloodbath!

Above is the 4 hour Bitfinex candle chart. Bitcoin has just dipped below $6000 and there is good reason to expect similar drops as in the previous 3 occassions. That is $1000 USD drop. I suspect we may even see Bitcoin test levels as low as $3800.

What is important to realise is that below $5000 it is unprofitable for many commercial mining operations. I have covered this in my previous post.

Bear in mind that the mining difficulty will increase by perhaps 10% or thereabouts in the next 3 days. 10% increase in difficulty will have the same effect as a 10% drop in price. This combine effect of a huge price drop and a 10% increase in BTC mining difficulty may be the perfect storm or black swan event that set in motion the dreaded chain death spiral.

One must ask why mining difficulty have gone up so much in the last few weeks? Is it because of newer, more efficient miners being deployed? Bitmain have always endeavoured to make their miners available to the public promoting mining decentralisation. Bitfury and newer manufacturers in Korea and Japan, employing more efficient chips, have kept their technology to themselves. It is certainly not good for mining decentralisation and could very well backfire on them. The future for BTC is not bright with this 'sword of damocles' hanging over it.

Something is happening and it is still hard to imagine what the crypto landscape will look like after the dust settles. The guiding principle I suppose is to invest in the technology and not the hype, and even this is hard to do as we often can't tell what or how much is hype until reality sets in. Shucks.

If in doubt, sit on the sidelines and many ( 3 billion USD ) are certainly doing this. It would be better is crypto is based on Tether than BTC or USD. I broached on this in a previous article. Whether it will, depend on the users, and in my opinion this is much better than the whole market rising and falling with the price of BTC. At least this shift will enable each coin and project to be valued on its' own merit alone. If you have a better solution - do comment!


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