Gold has long been considered a highly speculative hoarding asset because of its scarcity. The scarcity of gold is the reason for the total gold market capitalization to reach over 7 trillion dollars, with high demand from global financial institutions, individuals and central banks. And recently, with the development of Bitcoin, people have started to consider cryptocurrencies the same scale as gold. Especially when the Bitcoin halving is approaching.
The scarcity of Bitcoin will be like gold after halving
In 2013, one Bitcoin could only buy 0.01 ounces of gold. At the present time, one Bitcoin can buy more than 5.5 ounces of gold. Even compared to gold, the value of Bitcoin has increased significantly over the past decade. Bitcoin is as scarce as gold. Producing a new Bitcoin requires a multi-stage process, called mining.
Since its inception, the supply of Bitcoin has been limited to a maximum of 21 million coins. Today, about 18 million Bitcoins exist and new Bitcoin is created at a rate of about 3.6% per year. Every 10 minutes, when miners process a new block, 12.5 new Bitcoin will be minted. After halving in May, the new Bitcoin issuance will be reduced to only 6.25 Bitcoin minted every 10 minutes.
It is thought that if the number of operators decreases, network security is better. However, Bitcoin's economy is tending to recover and balance itself. After two halving in the past, the limited reward for miners and hash rates has recently reached its all-time high. In other words, when the supply of Bitcoin exceeded the 21 million limit, the security of the Bitcoin network also increased.
The Bitcoin development process is accelerating and the fact has proved that BTC has countless advantages over gold
- Audit Capability: Bitcoin nodes guarantee the ability to independently verify any Bitcoin, as well as the entire ledger history.
- Low international transfer fees: With the average current transaction fee of about $ 0.24, Bitcoin can be sent to any user, in any country in the world with an Internet connection. In September, a Bitcoin transaction worth over one billion dollars was sent for a fee of only about $ 700.
- Privacy: If you want to exchange gold without a third party, then both trading parties must be present. Meanwhile, because of transactions on a peer-to-peer basis, Bitcoin can be deposited via digital.
- Mobility: Since Bitcoin private keys can be memorized with a simple 12-word phrase and can be sent digitally, Bitcoin is highly portable even in large numbers, unlike yellow.
- Divisibility: Unlike gold, if you want to divide the part, you have to melt it down, Bitcoin can easily be divided. You can own or deposit a part of Bitcoin, as well as thousands of Bitcoin at a time.
- Scarcity: Bitcoin supply will soon be scarce as gold.
So what gives valuable assets like gold or Bitcoin a potential value in a world without peg? Valuation requires comparing one property to another, with varying degrees of volatility. The same is true for fiat. The value of the dollar and the euro is constantly changing in a world of exchange rates. Across the global markets, supply continues to shift to overwhelming demand from one asset to another. The modern monetary system is very dynamic, especially when global central banks move to increase or sign money supply contracts.
Economies can sometimes prosper when the money supply grows by independent central banks. Moreover, history is rife with hyperinflation events such as Germany in 1921-1923, Zimbabwe in 2007-2009 and Venezuela today. Economic inflation has boosted demand for gold, especially during periods of high economic instability. Over the past decade, the value of Bitcoin relative to gold has increased significantly in the context of growing global economic instability. Gold and Bitcoin are safe haven assets, helping people avoid the problem of fiat devaluation. Equipped with countless technological advantages, promoting the development and maturation of the global market, Bitcoin is an equally important asset class for gold-based rivals in the digital age. digital.
Miner BTC will break even when valuing the market higher
To maintain the current level of mining, Bitcoin's market price will have to range between $ 14,000 and $ 15,000. Right now, miners can breakeven between $ 3,500 and $ 7,000 depending on electricity costs. But the Bitcoin network is still highly competitive, recently reached 125 billion billion hash every second, confirms a record level of activity.
At a high level of mining, and even when the BTC price is nearing $ 10,000, mining breakeven is a matter of concern. Even S17 buffalo, one of the newest and most powerful buffalo rigs cannot break even at this price. Interestingly, miners are catching up even though most of their buffalo rigs are unprofitable.
A combination of low electricity costs and already built farms can boost pre-halving operations. On some days, the network produced 1,950 BTC instead of 1,800 BTC as expected. This means that the halving event will arrive a few days earlier than expected, and make mining more difficult.
China's BTC mining pools are dominating
Currently, China's Bitcoin mining pools and pools are manufacturing more than 50% of all blocks. This number is still a constant, and so far, there has been no joint collusion aimed at attacking or reorganizing the network. However, after halving, the SHA-256 hashing capacity will have to find a new reward source to break even. Transaction fees are not enough to boost the mining economy, as they account for about $ 200,000 a day in revenue.
Potential scenarios include the expected development of BTC price, which rises above $ 14,000, setting new yearly highs. This means that for most miners, block production is still feasible. But maybe the price of BTC is still lower and miners will try to exploit other SHA-256 networks. At this time, Bitcoin Cash and Bitcoin SV can be accepted, although for now, most miners are operating below breakeven.
The worst case is that the miners will surrender, especially affecting smaller mining operations. The Litecoin halving last summer was an example of the question of what happens when block production no longer yields high returns. The Litecoin network has slowed significantly.
👀… Almost 50% is uncertain about a death spiral or miner capitulation after May 2020 #bitcoin halving. Those are the people / risks that stand between current $ 8300 btc price and $ 50-100k S2F model value after the halving. If this risk disappears .. 🚀https://t.co/FIMcEZWDPn pic.twitter.com/lZVpdsrwo4
– PlanB (@ 100trillionUSD) January 23, 2020
“Nearly 50% are uncertain about the death spiral or the possibility of miners surrendering after the Bitcoin halving in May 2020. These are the risks that stand between the current BTC price – $ 8,300 and the model value. S2F from 50-100k after halving ”.
In the case of Bitcoin, it is possible that China's mining operations are even more influential, as they try to manage to break even and continue working while other miners die.
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