03/06/2024 0 Comments

1. Bitcoin Enthusiasm is Unstoppable

Since the start of the year, the bitcoin price has increased by around 50 percent. And it looks like it will soon exceed its all-time-high from November 2021. The party may even go on, provided the bitcoin ETF inflows continue and bitcoin’s halving event restricts supply.

The surge in demand which was anticipated at the time the crypto ETFs were approved by the Securities and Exchange Commission (SEC) in the United States in January and the upcoming halving event for bitcoin mining have caused the value of bitcoin to rise sharply over recent weeks.

At the start of the year, the oldest cryptocurrency was traded at 44,172 dollars. The value of bitcoin has increased to 69,350 dollars and marked an all-time high.

Bitcoin ETFs With High Inflows

When spot bitcoin ETFs were approved in January, this caused the capital flow into these products to increase. «Reuters» reports that around 2.17 billion dollars have flowed into spot bitcoin funds in the last week. According to data from the London Stock Exchange, more than half of this amount is going into the iShares Bitcoin Trust from BlackRock. The approval is seen as the starting gun for investments in crypto values from wider groups of investors and institutional investors.

New Bitcoin Halving

This effect is also attributed, in part, to the so-called bitcoin halving. This is where the value that a bitcoin miner receives as a reward when they successfully add a block to the bitcoin blockchain (essentially providing the processing power required to verify transactions) is halved. The «Proof of Work» process means that new bitcoins can only be created through processing capacity. Halving means that over time, there are fewer and fewer bitcoins in circulation. The fourth halving event since bitcoin was developed is scheduled to take place on April 21, 2024. At present, around 900 bitcoins are created per day through mining activities. At the halving event, this value will be halved.

Both effects have led to a new enthusiasm for bitcoin. And in view of the currently rather favorable financial markets overall, more investors are prepared to go after more speculative assets as well, and jump on the bandwagon.

High Volatility

But woe to those who miss the signs that the party is coming to an end. After the last all-time-high, it took only two months for the price to drop to around 35,000 dollars – losing nearly half its value. One year after the last all-time-high, bitcoin was still only traded at around 17,000 dollars.

At the end of February, the ECB – known for its critical stance when it comes to crypto values – warned of the dangers linked with bitcoin investments in a blog post. The blog post describes them as «the emperor’s new clothes, making reference to the fairy tale by Hans Christian Andersen.

Promises Not Kept

«Bitcoin has failed on the promise to be a global decentralized digital currency and is still hardly used for legitimate transfers, writes the European Central Bank. «The latest approval of an ETF doesn’t change the fact that Bitcoin is not suitable as means of payment or as an investment.

For supporters of bitcoin, the formal approval by the SEC confirms that bitcoin investments are safe, and the preceding rally is deemed proof of an unstoppable triumph. «We disagree with both claims and reiterate that the fair value of Bitcoin is still zero.

2. What the Bitcoin halving means for the network’s energy consumption concerns

Occurring approximately every four years, Bitcoin’s upcoming halving event seems to have once again piqued the interest of investors all over the globe.

This is because the block reward for mining the cryptocurrency is set to be slashed by half, effectively diminishing the rate at which new BTC is generated and introduced into circulation. This mechanism is central to Bitcoin’s deflationary economic model, designed to cap the total supply of Bitcoin at 21 million.

Bitcoin energy consumption concerns

The halving of Bitcoin’s mining rewards has amplified the discourse surrounding the cryptocurrency’s already high energy consumption, especially since its associated computational processes consume vast amounts of electricity, predominantly sourced from fossil fuels, according to a recent study from the United Nations.

Critics further point out that if the reduced mining rewards lead to more energy-intensive practices to sustain miner profitability, this could exacerbate Bitcoin’s carbon footprint, thereby conflicting with many of the United Nation’s global sustainability goals.

Not everyone is convinced that the halving will result in increased energy consumption.

Aravind Sathyanandam, co-founder and chief strategy officer for Bitcoin-based decentralized finance (DeFi) platform Velar, told Cointelegraph that the event will primarily affect the block reward issued to miners on the Bitcoin network and not its energy consumption.

Moreover, he said that the reduction in mining income could incentivize less efficient miners using older equipment to upgrade to newer, more energy-efficient models to maintain profitability:

“The halving will increase operating costs for miners if the BTC’s value or transaction fee revenue does not rise to compensate them. This could force some miners with slim margins to suspend operations. However, efficient miners will upgrade to advanced ASIC rigs that maximize productivity and minimize energy overhead. The latest mining gear tends to be far more energy efficient in terms of hashes per watt.”

Sathyanandam said that while the halving may contribute to a short-term drop in energy use if unprofitable miners go offline, broader industry incentives around efficiency and innovation could drive continued improvements around energy.

3. Core Scientific reports increased bitcoin mining

Core Scientific, Inc., a prominent bitcoin mining company, announced its operational achievements for February 2024, highlighting an increase in its self-mining hash rate and the completion of significant miner payments. The company, which operates approximately 222,000 owned and hosted bitcoin miners, disclosed that it earned 893 bitcoins through self-mining and its customers earned an estimated 307 bitcoins in its data centers during the month.

The increase in self-mining hash rate was attributed to the redeployment of earlier-generation miners, which were replaced by more efficient S19j XP units in January. This strategic move capitalized on favorable bitcoin pricing and contributed to an enhanced bitcoin earning capacity for the company.

Core Scientific’s CEO, Adam Sullivan, noted the company’s focus on managing investments to maintain financial strength. By completing all miner payments due in 2024, the company is directed to concentrate on new miner purchases and organic infrastructure growth.

The company’s data centers, located across Georgia, Kentucky, North Carolina, North Dakota, and Texas, now boast a total energized hash rate of 25.1 EH/s. Core Scientific’s owned fleet of miners, accounting for about 77% of its total miners, has a hash rate of 18.9 EH/s.

Additionally, Core Scientific provides hosting services for approximately 51,000 customer-owned bitcoin miners, making up roughly 23% of the miners in its data centers. These hosted miners earned an estimated 307 bitcoins in February, including rewards paid to the company under proceeds sharing agreements.

Core Scientific also supports local grids by reducing power consumption at its data centers, which contributed 941 megawatt hours to grid partners in February. This practice aids in stabilizing electrical grids, particularly during periods of high demand due to temperature fluctuations.

The company’s recent deployment of new S19j XP miners from Bitmain, completed in January, allowed the redeployment of de-energized prior generation miners. Core Scientific has also accelerated the delivery of additional Bitmain S21 miners, with the process beginning in mid-March 2024.

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Harvey CHEN