07/11/2023 0 Comments

1. At anniversary of 2016 BTC halving, a look to the next one

Seven years ago, Monday, bitcoin mining rewards were cut from 25 bitcoins to 12.5 BTC — a phenomenon that spurred a price rally industry watchers expect to repeat when the next Bitcoin halving hits in 2024.

The implications of the history of halvings repeating in bullish price terms would spill over to bitcoin traders and holders, as well as miners and other network participants. It’s a pattern that has held true across a number of halvings: The 2016 halving was Bitcoin’s second, taking place nearly four years after the first in 2012 and four years before the third in 2020.

A fourth bitcoin halving is slated for April 2024, at which point mining rewards will fall to 3.125 BTC per block. 

Bitcoin traded around $650 on July 9, 2016, Berenberg Capital Markets analysts noted in a recent report. And 524 days later, it hit a then-record of $19,712.

Similar rallies occurred after the first and third bitcoin halvings, Berenberg analysts — Mark Palmer, Matthew LaFlash and Hassan Saleem — found.

Bitcoin jumped from $12 on Nov. 28, 2012 to $1,164 just 367 days later.

After mining rewards were slashed from 12.5 BTC to 6.25 BTC on May 11, 2020 — when one bitcoin cost $8,821 — it reached its all-time high 549 days later at $69,036.

“If a rally were to occur after the fourth halving, and if it were as long-lived as the rallies that occurred after the past couple of halvings, then it would continue until around October 2025,” the Berenberg analysts wrote.

But the adoption level of bitcoin now from seven years ago is distinctly different, industry participants said.

Bitcoin’s hash rate sits at roughly 425 million terahash/second (TH/s), according to data compiled by YCharts.com. That figure was closer to 1.5 million terahash/second (TH/s) in July 2016.

“Back in 2016 you could solo mine with just your laptop, whereas now you need high-end, mining-specific machines and join large mining pools to compete,” said Matt Lason, chief investment officer at crypto hedge fund Globe 3 Capital.

Lason added he expects bitcoin’s price to follow previous trends by spiking in the upcoming halving’s aftermath, noting that the bitcoin halving cycle is set to correspond with a crypto and equity bull market.

Bitcoin’s price fell below $17,000 after the collapse of crypto exchange FTX. But it stood at about $30,300 Monday afternoon — up roughly 82% so far in 2023.

The Berenberg Capital Markets analysts pointed out, too, bitcoin’s positive price action after BlackRock — a TradFi giant with $9 trillion assets under management — filed an application with the SEC to launch a spot bitcoin ETF last month.

BlackRock CEO Larry Fink said last week during a Fox Business interview he believes the role of crypto is “digitizing gold in many ways.” He also referred to bitcoin as an “international asset.”

Despite an expected rise in bitcoin price, the 2024 halving presents a unique challenge for miners, Lason said. As the rewards of those companies are set to drop, their hardware and electricity costs have “exploded,” he added.

More miners have opted to sell at least a portion of the bitcoin they mine in recent months to cover various operating costs.

Geoffrey Kendrick, head of Standard Chartered’s foreign exchange and digital assets research, said in a research note Monday that he expects miner selling to decrease amid higher bitcoin prices and increased cash profits.

This could push bitcoin’s price to $50,000 by the end of the year and to $100,000 by the end of 2024, he added.

2. Luxor Technologies Expands Bitcoin Mining Derivatives with 6-month Contracts and Daily Settlement Rates

Luxor Technologies, a Bitcoin mining software and services company, has announced the expansion of its Bitcoin mining derivatives contracts. According to a press release sent to Bitcoin Magazine, the new offering from Luxor’s Derivatives Desk includes six-month duration contracts and daily settlement rates, providing market participants with extended contract periods and swift access to liquidity. The press release stated that the addition of these features enhances hedging efficiency and reduces the cost of capital in the Bitcoin mining derivatives space.

Matt Williams, Luxor’s Head of Derivatives, expressed his enthusiasm for the innovative pricing model, stating, “This innovative pricing model takes Hashprice contracts to the next level.” He emphasized that the integration of daily settlement rates makes their offerings more attractive to traditional finance investors, expanding the reach of Luxor’s Hashprice Marketplace beyond the mining sector. Williams added, “This development underlines Luxor’s vision of transforming hashrate into a viable asset class.”

The press release described how as more participants join the Luxor Derivative Desk, the increased liquidity is expected to improve the cost of capital for miners. This update comes at an opportune time, with miners approaching the 2024 Bitcoin halving, which will result in a 50% reduction in the BTC value of block subsidies. Luxor’s six-month Hashprice contracts could assist miners in planning long-term hedging strategies to navigate the impending volatility.

Luxor CEO and co-founder, Nick Hansen, commended the upgrade, affirming the company’s commitment to financial innovation in the Bitcoin mining sector. He described it as an advancement in their vision of hashrate as an asset class and expressed excitement about bringing this forward-looking product to their extensive client base already using Hashprice contracts.

The Hashprice contracts are traded on Luxor Derivative’s OTC Marketplace, enabling sellers to secure Bitcoin mining revenue and buyers to access non-physical exposure to Bitcoin mining. Luxor’s Derivatives Desk facilitates order matchmaking, manages counterparty risk and settles payments using the Bitcoin Hashprice Index as the reference rate for expected mining revenue.

3. Bitcoin hash rate hits all-time high as miners continue to expand capacity

The difficulty of bitcoin mining has been rising steadily for some time now, as more and more miners compete with each other to successfully mine the next block on the bitcoin blockchain.

With the weather now clearing up in Texas, the world’s bitcoin mining hub, miners are coming back online to double down on their operations. This time, it has pushed the mining hash rate to a new all-time high.

Hash rate reaches all time high

Over the weekend, the mining hash rate reached a new all-time high. According to Information backed by hashrate index statistics From Ycharts, the hash rate of bitcoin increased to 465 EH/s on Saturday from 406 EH/s the previous day.

Notably, the 7-day average hash rate reached 401 EH/s on Saturday, while the 3-day average has risen by more than 18% to 448 EH/s. Although the hash rate has now dropped to 425 EH/s at the time of writing, it is still at its all-time high and is up 119.1% from a year ago.

An increase in the hash rate naturally leads to an increase in the block production rate. In the past few months, BTC miners were aiming for a block production rate of 6 per hour, now, a block is produced in an average of 9 minutes and 15 seconds.

Bitcoin mining revenue reaches $184 million in Q2

This year has seen a rapid increase in bitcoin transaction volume as the cryptocurrency continues to dominate the industry. In the last 24 hours alone, the total bitcoin trading volume increased by 30.37%.

according to a reports Published by Coin Metrics on July 5, BTC miners generated a remarkable $2.4 billion in revenue during the second quarter of 2023. Of this amount, $184 million came from transaction fees alone, representing more than the last five quarters.

This increase in transaction fee revenue is associated with an increase in transaction volume following the introduction of the BRC-20 token on the bitcoin blockchain. BRC-20 came about as a token standard to allow the creation and transfer features of convertible tokens on the blockchain through the use of sequential inscriptions.

Bitcoin miners have also experienced favorable macroeconomic conditions over the past quarter, including lower electricity rates for miners based in the United States. On the other hand, bitcoin mining is on the rise in the Middle East, with the United Arab Emirates leading the way. Miners in the United Arab Emirates now produce about 13 EH/s, which is about 4% of the total hash rate.

As for bitcoin, the cryptocurrency has been hovering around $30,000 since late June.

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Harvey CHEN

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