Given that it is the world’s most popular cryptocurrency, it may seem bizarre to ask, ‘is Bitcoin dead?’.
But the BTC value has fallen severely in 2022, and now crypto has been hit by the FTX exchange crash.
The collapse of FTX is well documented. In the week following the shocking FTX revelations, the crypto market cap fell by some $180 billion in less than 48 hours. Pretty much every coin in the top 100 was impacted. As the contagion spread, many people lost confidence in crypto once again.
One sector badly hit is the Bitcoin mining industry. It relies on the relatively high price of crypto to remain profitable.
The break-even price of mining changes from operation to operation depending on overheads. However, rewards for every block processed remain the same at 6.25 BTC
Is Bitcoin Dead?
Since the FTX crash, miners have sold their crypto at record levels. This has sent sell-pressure skyrocketing by 400% in the last couple of weeks alone – the most aggressive BTC sell-pressure in six years!
Generally speaking, for mining operations to remain profitable, the price of Bitcoin must remain relatively high. If not, we will see hundreds of mining operations become insolvent.
Recent research suggests that Bitcoin mining is highly concentrated, with just 10% of miners controlling more than 90% of the mining capacity on the network. Furthermore, it is estimated that just four mining operations, based in China, control more than 50% of the world’s leading cryptocurrency.
With the current price of BTC around $16,500, many mining operations are hoping the price doesn’t fall any lower. However, many experts believe a drop to around $12,000 is likely in the coming months. With global economic forecasts looking increasingly gloomy, this has every chance of becoming a distinct reality. This would be a disaster for miners.
So, is Bitcoin Dead?
Founder of Capriole Investments, Charles Edwards, believes the guaranteed profit of Bitcoin mining is long gone. In a recent interview, he went on record to say, “what we are seeing is not sustainable”.
He added that “mine-and-hodl” is no longer a viable strategy for Bitcoin miners, who need to “manage (trade) your BTC position constantly in this market”.
To underline Edward’s point, large-scale operations Core Scientific and Iris Energy recently confirmed that unless Bitcoin’s price improves in the near term, they will default on loans secured to pay for expensive ASIC infrastructure. Core Scientific went further, stating that any default would likely see the firm file for bankruptcy.
When you consider the rising cost of energy, the situation becomes perilous. The question is, will a combination of weak BTC price and increasing energy costs spell the death knell for mining and, indeed, the wider Bitcoin network?
The cost of maintaining energy-intensive Proof of Work networks is well documented, with many citing the cost to run the world’s number one cryptocurrency surpassing energy costs for the whole of Argentina.
Conclusion
If Bitcoin were to collapse under its own weight, what would this mean for the rest of the crypto market? Will capital flow into other projects with greener credentials and real utility? Or is this just a blip on the path toward the $1 million price tag envisioned by many?
The answer to the question, ‘is Bitcoin dead?’ is simply ‘not yet.’
Right now, we just don’t know what the future will bring. The picture will become clearer as we move through the coming months.
