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Bitcoin Mining Difficulty, Hash Rate Up; Miner Capitulation Postponed? 101
Source: iStock/NiseriN

While the price of Bitcoin (BTC) is dropping, the mining difficulty and hash rate went up. This has led some market observers to believe that we may not see a mass miner capitulation yet. (Updated at 15:09 UTC: updates in bold).
When the price drops and mining revenues decrease, miners who struggle to earn profits are forced to shut their least profitable gear off. However, Bitcoin mining difficulty, increased yesterday by 1.99%, despite major Bitcoin mining pool BTC.com estimated that it might drop by another 5% after a 7.1% drop on November 8. Now, another increase by 1.14% is expected in two weeks, though these estimations are less likely to be accurate the further they are from the event. And while the hash rate, or the computing power of the Bitcoin network, increased c. 5% since November 8, the price dropped by c. 20% in the same period of time – all BTC’s monthly gains have been completely erased, turning back the clock to the pre-rally numbers. However, the hash rate is considered to be a lagging indicator.

Bitcoin’s hash rate chart

(7 day average)

Bitcoin Mining Difficulty, Hash Rate Up; Miner Capitulation Postponed? 102
Source: Blockchain.info

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Bitcoin price chart:

Bitcoin Mining Difficulty, Hash Rate Up; Miner Capitulation Postponed? 103
Source: coinpaprika.com

“I think difficulty adjustment itself is a good sign, that means more calculating power involve in the BTC’s ecosystem. Indeed, it will bother Bitcoin miners that Bitcoin’s return cannot reflect its value, and it forced miners to quickly upgrade their hardware, which will be even harder for individual miners, more institutional investors will join the game. This is a game changer, will affect the mining industry,” Steve Tsou, CEO of RRMine, a Hong Kong-headquartered global Bitcoin hashrate asset management and trading platform, told Cryptonews.com, adding that “there definitely will be a unicorn level of hashrate institutional provider” and that “RRMine is aiming for that position.”

“What could be happening, and this is just a theory, is that some miners have begun to sell off some of their stash. During a bull market, like the one we had early this year, miners have a tendency to hoard their stash rather than selling it. This allows them to both take advantage of higher prices later on, as well as sending prices further up due to the lack of supply,” according to Mati Greenspan, Founder of QuantumEconomics.io.

“Given the price action in the last few days, if I were a miner with a stash, I’d probably consider selling at least some, if for nothing else than to keep the operation going. A situation like this could easily turn into a cold war that would force the cash weak miners out of the market,” he added.

In either case, after this week’s intense debate over the possibility of mass miner capitulation, some observers are suggesting now that there’s no such thing. “+2% difficulty adjustment: no miner capitulation,” says popular anonymous investor and Twitter user PlanB, but Twitter user Amrish replied to this: “Wouldn’t increasing difficulty, plus the recent crash in price to 7500 be a double whammy for the inefficient miners?”

“No miner capitulation,” says trader and economist Alex Krüger too. “Selling, yes, capitulation, no.” He goes to explain that were miners to continue increasing capacity at the same pace since May, without rising prices, then “market is likely to experience some sort of miner capitulation in coming months, either before the halving, or triggered by the halving.” However, he says, “that is ahead of us,” given that currently there has been increased miner selling – “yet this selling activity does not represent capitulation of any kind, as most miners are profitable given current prices and difficulty, particularly so on a cash basis (i.e. ignoring capex depreciation),” Krüger says.

Miner ‘light’ also commented on a thread by analyst Willy Woo calling it “an example of what happens when non-practitioners role play as market oracles,” adding that “It takes a logical leap with no evidence and the entire analysis collapses if that assumption is unstable” and “there is little visibility on miner behavior and the consequences of some machines being powered down.”

Meanwhile, as reported, Whinstone US, the owner of a Bitcoin mining site in Louisiana that recently merged with Frankfurt-based information technology company Northern Bitcoin, is currently building by far the largest Bitcoin mining facility worldwide with a capacity of one gigawatt on an area of over 100 acres (40 ha) in Texas.

In the meantime, the second largest producer of Bitcoin mining equipment, China-based Canaan, finally completed its initial public offering after the third attempt and raised USD 90 million yesterday.

At pixel time (11:21 UTC), BTC trades at c. USD 7,159 and is down by 10% in the past 24 hours, by 18% in the past week and by 10% in the past month.

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Learn more: Halving and Beyond: What the Future Holds for Bitcoin Miners

Sead Fadilpašić , 2019-11-22 11:47:00 ,

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NewsBlock © 2019 - 2020 All rights reserved.

NewsBlock © 2019 - 2020. All rights reserved.


While Bitcoin’s price seemingly moves without rhyme or reason — collapsing by dozens of percent and embarking on face-melting rallies on a whim — the cryptocurrency market is filled to the brim with fractals.

Related Reading: Analyst: Bitcoin Price Likely to Fall to Low-$8,000s as Chart Remains Weak

A brief aside: A fractal, in the context of technical analysis and financial markets anyway, is when an asset’s price action is seen during a different time. This form of analysis isn’t that popular, but it has proven to be somewhat valuable in analyzing Bitcoin.

One recent fractal popularized by a well-known cryptocurrency trader is implying that BTC is going to return to the low-$7,000s in the coming days.

Bitcoin Fractal Implies Retracement to Low-$7,000s

A well-known crypto trader going by “Tyler Durden” on Twitter recently posted the chart below, which shows that a Bitcoin price fractal may be playing out. The fractal has four phases: horizontal consolidation marked by one fakeout, a surge above the consolidation phase, a distribution, then a strong drop to fresh lows.

If the fractal plays out in full, BTC could reach the low-$7,000s again, potentially as low as $7,100. This would represent a 20-odd percent collapse from the current price point of $8,800.

It isn’t only a fractal that is hinting Bitcoin has the potential to visit its lows. As we reported on Saturday, Bloomberg believes that if the GTI Vera Convergence Divergence Indicator flips red, a downtrend could push the cryptocurrency back to $7,300.

Related Reading: Stephen Colbert Pokes Fun at Bitcoin in Monologue: Mainstream Gone Wrong?

Can Bulls Step In?

But again, many believe it is irrational to have such bearish interpretations of the cryptocurrency’s chart at the moment. As reported by NewsBTC earlier, Popular crypto trader Mayne recently noted that the “people waiting for $6,000” are irrational. He quipped that Bitcoin retracing and consolidating after its fourth-biggest bull move in history ($7,300 to $10,500, a 42% gain) is perfectly par for the course, but noted that it’s totally possible we can go lower from $8,800.

The medium-term technicals support this.

Trader and CoinTelegraph contributor FilbFilb found that by the end of November or start of December, the 50-week and 100-week moving averages will see a “golden cross,” which he claims is far more significant” for the Bitcoin market that other technical crosses.

Also, a Bitcoin price model created using Facebook Prophet machine learning found that the leading cryptocurrency is likely to end the year at just over $12,000. What’s notable about this model is that it called the price drop to $8,000 months in advance, and forecasted a ~$7,500 price bottom for BTC.

To put a cherry on the cryptocurrency cake, Crypto Thies observed that when Bitcoin bottomed at $7,300, it bounced decisively off the 0.618 Fibonacci Retracement of the move from $3,000 to $14,000, which correlates with the two-week volume-weighted moving average. He added that summer 2019’s consolidation was marked by Bitcoin flipping major resistances into support levels, implying that a bullish reversal and subsequent continuation is likely possible in the coming weeks.

Featured Image from Shutterstock


Nick Chong , 2019-11-10 12:00:38

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