Bitcoin is a revolution, Bitcoin is gold 2.0, Bitcoin will be worth 50 or even $ 100,000 by 2021 … All this is very beautiful and attractive, but why so?
Bitcoin requests new reading grid
After having analyzed (as amateurishly as I can be) the psychology of investors, we must now dwell on a new kind of analysis. Both the supply and the demand determine the price, the mechanics that support the system. Bitcoin is both foolproof and disarmingly simple.
These traits are in my opinion the reason why Bitcoin will overcome any crisis, in a way that went unnoticed, he has just shown us why he seems to be performing better than any other financial system before him. For that, we have to analyze the parameters of the blockchain itself.
To do this, my reference in this area is the blockchain.com site. This site offers all the quantifiable technical parameters of the blockchain and allows us to analyze them as we wish. For most mathematicians and / or programmers, the .JSON and .CSV files are available there.
Bitcoin crash, a bogus problem
Here is the background that we all know: March 2020, the markets are collapsing, bitcoin is breaking records and losing almost 60%, becoming the laughing stock of its detractors.
However, it is already clear that the correlation of BTC prices with the markets will not last very long. : First index, Bitcoin, 2 days later, laughs at the general stock market movement and is already recovering in value. Second clue, while governments print at high speed, which will inevitably cause a inflation the price of all fiat currencies over the medium term, we know that each time halving, Bitcoin manifests its nature deflationary. Supply and demand certainly put the price of BTC at the mercy of investors, but its basis is already evidently solid. Yet in addition to these facts, the blockchain ecosystem has a master card in hand.
The difficulty of mining depends on the hashrate determined by the total computing power of the miners’ network.
The higher the hashrate Studentplus the difficulty of calculation increases. My concern following this crash was that if this price were to last until halving, many miners could go bankrupt for lack of profitability.
However, considering that the mining protocol adjusts to hashrate, this has little effect on long-term hodlers since mining will become more accessible, allowing transactions to resume their normal course.
However, if these bankruptcies were to occur in series, we could attend a cascade of undesirable effects, lengthening transaction times, frightening other investors, driving the price down and so on until purifying the blockchain of the majority of its investors, leaving in the end only the most fervent defenders of the system. (Even at $ 50 per BTC, I will always be there).
I cannot say whether what I see is intentional, or caused by quarantines and confinements in China, where most of the mining farms are located, but following this observation, my fear is gone.
We can see in the graph below thatat the time of the crash (March 9), the hashrate decreased considerably, which suggests that a large number of mining machines have been deliberately turned off, or have been overheated due to a lack of maintenance personnel.
As a result, the average transaction confirmation time has increased, reaching up to 20 minutes …
Simultaneously, transaction fees increase to compensate (a little) the miners, and to discourage (a little) the transactions…
Finally, every 2016 blocks, the calculation difficulty adjusts to the reality of the blockchain making miners more profitable for less energy consumed.
What to remember
Bitcoin adapts to its own reality, making any authoritarian intervention totally futile and giving way to a hitherto infallible supply and demand system! Having proven itself against hacking, we now have all the metric data convincing us of its solidity as a complete financial system. The price may always go down or go up, but that’s not the factor that will determine its future. Unlike fiat currencies, Bitcoin is becoming scarce, the system is self-regulating, it is up to us to decide the price…. WE ARE BITCOIN.
Hi! My name is Steefer Phans by my international name (running gag), I am a self-taught person who was “lucky” to be on sick leave, I was able to invest a lot of time understanding and learning. In cryptos since 2016, active since 2018 (Yep, I missed the bubble, the auntie…) I don’t pretend to understand everything, but I like to share especially my way of seeing the market, just to share with you which was a priori a lost time, ultimately very enriched.