Bitcoin difficulty re-targets after a month of dumps with NASDAQ on the horizon
With any commodity there is the markets side of the equation and there is the real world environment side. Bitcoin has plenty to offer both fields of analysis and the variables influence each other in various ways depending largely on their cumulative effects and projected outcomes.
Due to the heavy downturn in crypto prices in the bear markets, it is currently too expensive for many conventional miners and mining farms to keep operating. Due to high amounts of miner shutting off, the Bitcoin mining difficulty re-target has dropped approx. -22.5% since the start of November. Major mining hardware manufacturer Bitmain announced in September that it will be shipping S15 23TH/S ASIC miners with 7nm architecture in the end of December. A new wave of hardware is being released by other manufacturers that offers higher efficiency. With the next block halving expected in about 18 months, the pressure is on mining companies to improve efficiency and reduce mining costs.
Specialised ASIC mining chips for Bitcoin’s Sha-256 mining algorithm were first developed and sold over 5 years ago. It changed Satoshi Nakamoto’s vision of ‘1 CPU 1 Vote’ into a hardware intensive race to build the best mining devices and lots of them. All these farms mean that the difficulty setting for the algorithm code is way too high for any home user or most early generation ASIC to perform efficiently. The trend of regional centralisation has been playing out, where power sources and cooling costs are the major factors restricting use after initial investment.
Most current generation of mining hardware is becoming commercially non-viable in this scenario and going for sale at discount prices. Much of these pieces are not yet obsolete and can be up-cycled by users in regions with cheap electricity and a low value regional currency. There is an opportunity for redistribution of mining hardware to lower income communities across the world that could help promote decentralisation and self sustainability, but the main Bitcoin blockchain might be inefficient for them to use. There is space in the market for less well known altcoins and new crypto currencies, which can bring together communities either by using the mining hardware and open-source software for technological improvements and benefit from having a local currency to transact with.
If the hardware side of things aren’t what got you into Bitcoins, then it seems that there is a fork happening in the price mechanisms of Bitcoin, where now it is moving into the real and speculative markets for FIAT/BTC and other Cryptocurrency derivatives, which is always expanding.
This week, The Daily Express features an article quoting the NASDAQ media team’s Vice President, Joseph Christinat as saying that Bitcoin futures will begin trading on the NASDAQ next year. He goes on to explain that they have had an interest in this market for the last 5 years, and are keen to push ahead with greater involvement.
Market analysts have continued to be quoted saying that this shows serious adoption by large financial institutions is getting nearer, claiming that the futures contracts will help to protect traders from the risks due to price volatility and network failures. We are told this means that there will be new money moving into the markets soon. All too often this has been true for over a year and will continue to be, but we are not clearly able to see where the money is moving.
This is because the money is not simply buying coins or taking a small position, it is working to make a large position outside of the visible market places for margin trading and thus influence the price more effectively. Currently the shrinking volume and oversupply of coins and exchanges means that OTC trading and physical futures settlement have led quickly to a race to the bottom for bulk prices and broker’s fees.
In this kind of market place, it makes sense for exchanges and liquidity operators themselves to push prices down so long as their total capital asset value is comparable. This leads to algorithmic abuse across multiple public trading platforms to maintain a fixed OTC desk price or futures contract position.
Ultimately this is another move by the mainstream banking tycoons to corner and box in Bitcoin for another round of speculative investment before any real gains can be made in the long term. Speculation is most likely to control the markets until mass adoption can cause genuine sentiment and price growth to occur.
At this time there will be more drama while the legal and financial positions of authority and utilising blockchain assets as an investment and trading tool is tested. Already CBOE and CME in the USA started Bitcoin futures in Dec 2017. In the UK since March this year a physically settled Bitcoin Futures opened at Coinfloor, while Crypto Facilities started trading ETH/USD and LTC/USD futures contracts in May and June respectively, but were already taking XRP futures since October 2016.
Looking at various price cycles for Bitcoin and the major altcoins mentioned above, it seems probable that these platforms may have already received major short bids at critical times to encourage and enable accumulation during periods of capitulation. This is exactly the phase of the boom-bust cycle we are currently following, where the most potential gains can be made from any well measured entry into the market.
The long term question here is that do we need another manipulated system of value exchange which is vulnerable to the same or a whole new set of problems that effect typical currencies? Will speculative trading kill off the intrinsic network value of cryptocurrencies? How can networks evolve to provide a harmonious ecosystem that does not encourage centralisation and allows suitable rewards for an active engagement?