The beauty of Bitcoin is that it is “mined” anywhere on the planet, and thus the control is decentralised. No single government or corporation has full control of this global digital currency. Therefore it is independent and available to whomever can buy a mining rig, or appropriate tech hardware, and link it to the internet.
The mining power of Bitcoin is known collectively as the “hash rate”. As we can see on https://www.blockchain.com/en/charts/hash-rate the current hash rate or mining production of Bitcoin has gradually been climbing all year and peaked at over 108 000 000 TH/s recently on 26 September, though not after having a 40% drop just before. However, the hash rate simply bounced back up to its ATH as seen on this chart. And mining or hash rate majorly affects Bitcoin price. It’s not just “price discovery” or the meeting of buyers and sellers, that determines price as in the capitalist system. Mining speed and efficiency greatly dictates price more than we realize, so mining is a crucial factor central to the value of Bitcoin.
So which countries are mining the most Bitcoin and how are the mining pools distributed? Here are the stats for October 2018, one year ago, compared to today October 2019 (thanks to Chico Crypto Youtube channel):
Country: 2018 vs 2019
China 75% vs 65%
America 7% vs 10%
Czech 11% vs 10%
Russia 0% vs 7%
Georgia 2% vs 3%
India 1% vs 1%
Other 4% vs 4%
This is basically the total mining distribution globally, and thus the hash power is determined by these countries at present, albeit by private corporations or people. China is way ahead in controlling the Bitcoin mining power which, as I mentioned in the last article, leaves it vulnerable to the Communist dictatorship or government takeover if they choose. Besides that, mining “farms”, as they’re called, are obviously vulnerable to extreme weather events, wherever they are. Siberia in Russia is fast becoming a big mining region too, since the cold favors mining farms and production.
If you look at the hash rate graph, for example, you can see that just after the ATH peak in hash power just recently, the hash rate fell again. This was attributed to a fire that broke out at the mining farm of one of the oldest mining companies – Innosilicon, where around $10 million worth of mining equipment was lost. Prior to that in August this year a mining farm in China was destroyed by floods, although the hash rate wasn’t too badly affected.
Nevertheless, we can see that Bitocin price is vulnerable to or affected by uncontrollable external factors sometimes, like politics and extreme weather. And then we are all dependent on the internet staying up and running to mine, trade or cash out our crypto, generally speaking, although there are also apparently exclusive Bitcoin-related satellites up there to run the blockchain regardless of the internet.
How does all this affect the price then? Well, it all depends on your costs, the crucial one being electricity. In the USA Bitcoin mining becomes unprofitable around $6 000, when miners there may be forced to shut down their mining rigs and cause the hash rate or Bitcoin production to drop. Therefore the theory is that even if Bitcoin price falls further, as it may well do in this current bearish retracement, $6 000 will act as a major support level. It was, after all, one of the biggest trading ranges and support levels near the end of the bear market of 2018.
If that is broken then remember that Bitcoin mining remains profitable in China until about the $3 000 region, so that will be another massive support level if Bitcoin falls back down to make the iconic “double bottom” that is rumoured to still be needed before price really starts the bull run proper. This double bottom configuration in price action was seen in the previous price movements of past years. It was the time of “capitulation’ and “reaccumulation” before Bitcoin price soared once more on its “uptrend” to new ATHs in late 2017.
With price returning to a bearish trend lately, I do not exclude the slight possibility that this bottom around $6 00 and possibly even $3 000 may need to be retested. This is just a conservative and realistic attitude, based on previous historic price action. In other words anything is possible with Bitcoin price.
At present price has broken below the 200 day EMA support as well as the 21 week moving average, the latter implying that we are definitely in a bearish trend now. Usually this 21 week moving average is the deciding factor of whether we are in a bullish or bearish trend. And bearish it is, so don’t be surprised if the parabolic bull run of the first half of 2019 was just a temporary phase and that $3 000 is still on the table. Bears have control as long as we are under the 21 week moving average medium term, while long term the bullish trend is also upon us. It may just require one more visit to the yearly lows at $3 000 to complete the double bottom.
I may be wrong – hopefully, though another chance at such cheap Bitcoin is actually a blessing, so there is no loss whatsoever for the long term investor and “hodler”. New highs are due in coming months or years, far surpassing the previous ATH of $20 000. Patience is key here. As billionaire investor Warren Buffet said – the markets move money from the impatient to the patient.
(Article also appears on my other blog site)