Delphi Digital: A comprehensive analysis of the market, mining and technical conditions of Bitcoin's third halving
Editor's Note: This article comes fromChain News ChainNews (ID: chainnewscom)Editor's Note: This article comes from
Chain News ChainNews (ID: chainnewscom)
Chain News ChainNews (ID: chainnewscom)
The halving of the Bitcoin block reward has been one of the most important events in the crypto industry, and this recent "halving" is particularly noteworthy given the current sluggish global economic environment.
The new crown virus epidemic has shown us that Western politics and economics are extremely fragile in the face of crisis, and global policymakers are all under tremendous pressure. They are all doing their best to avoid economic disasters, so they have chosen incredible quantitative easing policies, measures that have led to an increase in global debt to record levels.
In our opinion, Bitcoin’s value is primarily supported by its non-sovereign, censorship-resistant, and hard-capped supply characteristics. Compared with traditional "safe haven assets", under the current situation of heightened geopolitical tension, economic depression, and global isolation, the value of Bitcoin is more prominent, and it can further promote the popularization and application of digital assets.
first level title
Why Bitcoin? Why now?
As of this writing, the total amount of monetary and fiscal relief pledged globally exceeds $10 trillion, with most of the stimulus coming from the U.S., while the Fed's balance sheet has grown by $2.5 trillion in just the past two months . You know, this "on-balance sheet expansion" is almost twice that of the 2008 financial crisis. Before the coronavirus hit, it took the Fed nearly five years to add $2.5 trillion to their balance sheet, and policymakers were notoriously unlikely to change course anytime soon.
History is always strikingly similar.
When Federal Reserve Chairman Jerome Powell (Jerome Powell) announced that he has unlimited "ammunition" to buy various assets, market participants are full of doubts about the Fed's ability to prevent the economic downturn and its solvency, because the current economic environment limits quantitative The effectiveness of loose monetary policy.
Not only that, U.S. Treasury Secretary Steven Mnuchin (Steven Mnuchin) soon announced that the U.S. will increase its borrowing scale to $3 trillion in the second quarter to deal with the economic impact of the new crown virus epidemic. Pushing the U.S. debt-to-GDP ratio to record all-time highs, possibly even reaching the "120%" high during World War II.
Now, as the largest economy in the world, the United States bears a debt load of 25 trillion US dollars, which is 125 times the total market value of Bitcoin. It is expected that the US federal deficit will reach 16% of GDP in 2020, and the era of "trillion dollar" deficits has finally come.
But it’s worth noting that once major central bank asset growth starts to decelerate as policymakers are forced to step up their rescue efforts, Bitcoin tends to peak historically (though not much).
So, what are the advantages of Bitcoin?
In addition, as an alternative safe-haven asset, Bitcoin is also superior to gold and other precious metals in many ways, and these advantages are becoming more and more important in a world dominated by digital assets.
Many seasoned investors are fully aware of the risks of fiat currency issuance and other traditional financial situations, but few have taken the time to fully understand the value proposition that Bitcoin offers. As more and more influential investors begin to explore the potential of Bitcoin, the importance of Bitcoin as a non-sovereign asset and inflation hedge will increase.
Even well-known traditional investor Paul Tudor Jones (Paul Tudor Jones) has become the latest advocate of Bitcoin. In a letter to his investment clients, he mentioned that the cryptocurrency asset can withstand the pressure of central bank money printing. inflation, and said Bitcoin is like gold in 1970.
first level title
Bitcoin adoption and distribution
During the three-year period from the beginning of 2012 to the end of 2014, the proportion of wallets holding less than 10 BTC increased from 2% to 6%. In fact, based on the comparison of data in May 2020, except for the number of wallets holding 10-100 BTC that has not increased, the proportion of wallets holding coins at other levels has increased. It is worth mentioning that more than 14% of the Bitcoin supply is owned by those with less than 10 BTC in their wallets.
The figure below shows the correlation between the number of giant bitcoin whales and the price of bitcoin. The blue line represents the trend of the number of giant whales (holding 1000 BTC+), and the red line represents the trend of bitcoin price. In the two red circles, one occurred around January 2014 and one occurred around January 2018, you can see that the increase in the price of Bitcoin caused the number of whales to decrease; while in the two green circles, one occurred in 2015 Around March 2019, one happened around January 2019. When the price of Bitcoin fell, the number of giant whales began to increase.
Institutional lending continues to hit new highs;
Institutional investor interest has surged; (Grayscale, for example, added $500 million in assets under management according to its first-quarter report, and now manages $3.7 billion worth of crypto assets on behalf of clients, a new high.)
Retail investors are paying attention to Bitcoin. (Square’s Cash App, for example, had $306.1 million in bitcoin revenue in the first quarter of 2020. Among them, the company’s gross profit from bitcoin sales reached a new high of nearly $7 million.)
first level title
The figure below shows the ratio of Bitcoin held by well-known cryptocurrency exchanges such as Binance, Huobi, OKEx, and Coinbase from May 2019 to April 2020.
In terms of Bitcoin futures volume, BitMEX had very high Bitcoin futures volume and was the market leader in this space in September 2019, when Binance was just starting to venture into the Bitcoin futures space. But since then, Binance’s bitcoin futures business has grown tremendously and has firmly captured the market share BitMEX lost. In May 2020, Binance’s bitcoin futures trading volume was already 50% higher than that of BitMEX.
At this stage, the Bitcoin futures market is still "ruled" by Huobi, OKEx, Binance, and BitMEX, and these four exchanges account for 80% of the market share. Despite the popularity of CME Group’s bitcoin futures product, it accounts for just over 2.5% of the market by volume.
Previously, Bitcoin core developer Pieter Wuille announced the final version of the Schnorr/Taproot improvement proposal. The Schnorr/Taproot proposal has been published as BIP 340: Schnorr signature, BIP 341: Taproot, and BIP 342: Tapscript. The Schnorr/Taproot proposal will be able to Currency scalability, substitutability and script innovation have a significant role in promoting. In addition, Braiins, the company behind Slush Pool, also announced plans for the second-generation Stratum protocol (Stratum V2), allowing miners to choose to send block templates to mining pool operators.
OP_CHECKTEMPLATEVERIFY;
THE GREAT CONSENSUS CLEAN UP;
SIGHASH NOINPUT
lightning network
Other upgrades include:
lightning network
It’s worth noting that there are many private channels deployed on the Lightning Network today, private channels are those that don’t publicly broadcast transactions across the network. From the beginning of 2020 to May 6, the number of Lightning Network public channels was approximately 32,000, an increase of 2.5%. At the same time, compared to January of this year, the number of nodes in active channels has increased by more than 13%.
Since January 1, 2020, Lightning Network Bitcoin capacity has increased by 8%, and since the price of Bitcoin has increased by 35% year-to-date, the total value of the Lightning Network has also increased by nearly 40%.
first level title
Analysis of Bitcoin Mining Profitability
The figure below shows the trend of Bitcoin network computing power. Overall, the Bitcoin network computing power has been showing an upward trend, and there have been only a few short-term declines in history. In the last few months of the end of 2018, we saw a sharp drop in Bitcoin computing power. At that time, due to the sharp drop in the price of Bitcoin, it fell from $20,000 in 2017 to $3,500. As a result, mining activities decreased significantly, and many miners went bankrupt.
The latest decline in Bitcoin network computing power occurred from the end of March to early April 2020. This was because the new crown virus epidemic severely hit the global economy, which also led to a sharp drop in the price of Bitcoin. However, this time the Bitcoin network computing power recovered quickly up.
The impact of the three "halvings" in Bitcoin history on mining costs:
First Halving: 2012
The first "halving" in Bitcoin history occurred on November 28, 2012, when Bitcoin's computing power hit a high of 27 TH/s.
It can be seen from the above table that after the first Bitcoin block reward was halved, the network computing power rose to 25 TH/s, the block reward was reduced from 50 BTC to 25 BTC, and the break-even cost rose from $4.45 to At $12.68, while the price of Bitcoin rose from $9.5 to $13.5, the gross profit margin for miners plummeted from 53% to 6%.
Second halving: 2016
The second "halving" in Bitcoin history occurred on July 9, 2016, when Bitcoin's computing power hit a high of 1,580,000 TH/s.
As can be seen from the above table, after the second block reward halving of Bitcoin, the network computing power rose to 1,580,000 TH/s, the block reward was reduced from 25 BTC to 12.5 BTC, and the break-even cost rose from $217 to TH/s. Although the price of Bitcoin rose from $420 to $680, the gross profit margin of miners fell from 48% to 33%.
secondary title
Third Halving: 2020
