The gruesome decline in the cryptocurrency market have seen enthusiasts question the life expectancy of Bitcoin and other digital assets. The market is likely to close the year close to the bottom. Something that critics of virtual currencies are celebrating and almost pulling the “I told you look.”
Bitcoin ballistic move late last year saw it almost touch $20,000. This incredible move sent waves in the market as the world became more aware of virtual currencies not only as investment options but also as means of payments. However, this year, Bitcoin embarked on a gain trimming exercise trading below a long-term bear trend. Moreover, the declines have continued to test and break below vital support areas. The overarching declines last month sent jitters in the market as the price broke below important levels at $6,000, $5,000 and $4,000.
While price swings are not new to the market. The paralyzing move in November have led many in the industry to have questions regarding the ability of Bitcoin price to stay afloat. Bitcoin was popularized as a store of value and last year it exceeded the expectations of the investor. However, 2018 has seen investors lose a big chunk of their profits as prices continuously headed south.
Bitcoin (BTC) has not be fully utilized as a means of payment due to the low scalability, high cost of transactions and long transaction confirmation time required. This has hindered its adoption as an alternative to the fiat currency systems. Another factor that has been hindering adoption and acceptance is speculation. It increases volatility, which in turn keeps institution investors at bay.
The current price action is literally sifting investors into two camps. The ones who got involved with the assets for their potential massive returns and those that embraced the technology and its impact on the Global financial sector.
Bitcoin (BTC) Mining
Bitcoin miners are a very special category of investors in the industry and in the Bitcoin community. They validate transactions by solving complex mathematical equations. The miners are rewarded with BTC for every block of transactions that is processed and authenticated. The BTC earned as reward by the miners are then sold for revenue and for the operation the large rigs and equipment used.
The recent dips in the market have shaken Bitcoin miners with many of them deciding to close down. The network’s hash rate has plunged by 24% (hitting all-time low) according to Blockchain.com. Hash rate is a measure used to estimate the power used in mining a virtual currency. It is said that the drop is likely to be fueled by exiting miners who prefer to put their resources in miming other digital assets.
A report by JPMorgan Chase recently noted that that some participants in the market are recording losses following the drop in Bitcoin price. This is because mining is steadily becoming an uneconomical venture. The cost of mining BTC depends on the resources consumed. Some of these include electricity bills, the mining rig efficiency and other processing factors. Low prices in turn mean that miners are not able to break even resulting in losses. A report published by Bloomberg states:
“The break-even cost to mine a single Bitcoin using Bitmain’s Antminer S9 rig was estimated at $7,000 in a Nov. 16 report by Fundstrat Global Advisors, though the level is probably lower for some miners with access to cheap electricity and equipment.”
Bitcoin price hit rock-bottom last week testing $3,500 before correcting higher above $4,000. Presently, BTC is trading at $3,938.21 as the market consolidates the losses. The largest crypto in the market is down 3.35% as per the data on Blockmodo and has a trading volume of $5.2 billion in the last 24 hours.