Thanks China
Daily Ramble
The family and I took the weekend to do some camping. Part mission: “Leave Home” and part mission: “Find Sun.” Both were successful, but the second part of the mission was degraded by a steady wind flapping our tent and keeping us from water activities. We did randomly discover Amazonian tree frogs in an inland aquarium. Yeah, Portugal is like that — the most random things in the most random locations. And always great food to be found. I love it.
But while enjoying the family time checking out sturgeon, carp, and otters, my subconscious was chewing on the Bitcoin market activities. The last week’s market action has been anything if not unpredictable. All the pros seem to have been slapped sideways by the sheer depth and magnitude of the plunge. I wrote about it Thursday, but over the weekend, the marketplace sold off another 30%. Someone somewhere re-wrote the rules of The Game, and we’re all trying to figure out what those new rules are.
The culprit seems to be Bitcoin sellers in China. On Friday, the Chinese government came out stating that they were going to begin “cracking down on Bitcoin mining.” The best information I can find suggests more clarity in the coming 1-2 weeks as this was a high-level direction with specifics to come. Looking at the selling activity, it is clear that this led to panic selling — sellers unloading their Bitcoin out of worry that it may become impossible to sell. Selling into an already soft market just continued to push it down.
The sell-off is interesting, but what I find most exciting are the extremely bullish long-term impacts of this decision. Right now, a majority of Bitcoin mining is done in China. For at least part of the year, a good chunk of this mining is being done on subsidized coal power. Nobody in the West likes this, but it’s outside Western control. It has led to a valid, though exaggerated, criticism of Bitcoin mining being dirty. The “crackdown” in China is specifically targeting Bitcoin miners using coal power. So the result: coal-powered Bitcoin mining is eliminated, and Bitcoin mining becomes more globally distributed.
Bitcoin that’s less carbon-intensive and more globally distributed — how does that sound anything less than bullish? Of course, those that position themselves ahead of the rest of the market reap the rewards when the market catches up… (not financial advice.)
Favorite Things on the Interwebs Today
Bitcoin is not just magic internet money — it’s improving the lives of the most vulnerable people.
Bitcoin Price Prediction
Weekend: $35k - $46k
Today: $31k - $40k
Tomorrow: $30k - $42k
The hits keep coming… Shortly after sending out Friday’s newsletter, the market discovered that the China FUD was not more of the same, but indeed something different: China was cracking down on Bitcoin mining. Over the weekend, this led to even more sell pressure as the price touched $31k before rebounding. We’re currently trading around $36k, once again trying to stabilize. At this point, from the technicals, we’re more likely in a bear market than a bull market. But the strength of the sell-off and the unusual market behavior of a country worth of Bitcoin mining companies unloading their Bitcoin makes me suspect this will be a bear trap. We’ll need this week to play out before I can come to any conclusions, but I can say that the bulls need to prove their strength this week, and the ball is firmly in the bears’ court. As long as we can stay over $30k, we stand a shot at bouncing back up to $42k by week’s end to resuscitate the bull market. Regardless, the market volatility is continuing unabated.
Bitcoin Q & A
Q: What does hashrate mean for Bitcoin?
A: Hashrate is a security measurement.
When a Bitcoin block is mined, a cryptographic mathematical puzzle is solved. Each attempt at solving the puzzle is considered a single hash. Each miner attempts to solve the puzzle hundred of thousands of times per second. The higher the network’s hashrate, the more computational power is needed to break the Bitcoin network. Hashrate tends to roughly follow price, meaning that as the price of Bitcoin goes up, it also becomes more secure. Already it is orders of magnitude more secure than any other network on the planet.
Thanks for reading,
Kent
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