Miners' Capitulation into Bitcoin Halving - Macro Analysis
Miners' Capitulate into Bitcoin Halving
On a macro level the Empire is currently building the 3rd Super Star Destroyer with Death Star capabilities to jump even further through hyperspace. There are 3 scenarios:
1. blue (most likely)
2. green
3. red
Miners Capitulation
In a nutshell - undercapitalized miners panic sell because difficulty is too high and mining is no longer profitable, price dumps, longs get squeezed, stop losses cascade, more miners sell.
The capitulation is signaled by a bearish MA crossover on the Hash Ribbons indicator. Last time a Hash Ribbon inversion took place in Nov 2018, when Bitcoin crashed from $6000 to $3000.
The inversion of the Hash Ribbons can lead to a 30-50% drop in the following days, with weeks and months of consolidation prior to an eventual breakout.
If capitulation occurs, subsequent positive momentum (bullish MA crossover) could be taken as a BTC buy signal.
formal cause of the dump: major inflow of 1st spend BTC from some unknown miner's wallet.
_______________________________
Basics of Bitcoin Mining:
- Bitcoin has cycles/epochs. Halving affects miners' revenue in each cycle and therefore the price. This is by design. Hash rate and difficulty adjustments ensure system operation and stability during a cycle. Price converges to a median of a triangle before each halving. It's like having a built in gyroscope. Difficulty adjusts both up and down automatically to counter the Hash Rate increase/decrease.
- Miner's goal is to sell bitcoins at max price and buy new equipment at low price to stay in the game. Therefore miners are incentivized to gather in large pools to be able to control hash power and the market by increasing/slowing down supply production. Built-in scarcity or artificially limited supply production causes the price to go up and attracts new investors - basics of supply/demand. Miners can halt all operations and cause the price to collapse. They can also dump 1 mil coins and crash the market at any given time or kill other coins with compatible protocol using 51% attack. They lobby for changes in the bitcoin protocol.
- Bitcoin is essentially a math formula, it's a sort of self-propelled pyramid scheme that is propagated by miners using investors' money as fuel. It will likely converge and stabilize around a single value or collapse in the long run. You can use it while it works.
- It's a pyramid because to be able to cash out your coins you must have a counter party - someone with fiat to buy bitcoins from you. You won't be able to sell if there's no buyer. Only the first few will. The rest will become bagholders. Or you will sell at 10% of the value. You don't notice this when there's enough liquidity in the market and price goes up which attracts occasional buyers. It's much harder to cash out when price goes down and no one wants to buy and people have to wait for weeks. Those always in profit are service providers that charge fees and control liquidity pools. People with lots of coins usually just donate them or try to run their own exchanges - this is the only way to get cash for coins and fees from trading/listings.
- that's why HODLing is pointless in the long run. Whales need lots of bitcoins only as leverage to be able to trade large positions, shake out the market and cash out occasionally. They can grow capital because they are hedged.
- miners need to sell bitcoins to upgrade the equipment and pay for electricity to be able to continue working. Their profit margin is very small, it reduces exponentially and at certain difficulty levels they go bankrupt like most traders. In the long run 1-2 mining pools will control the whole market. It will become a centralized monopoly. And you don't want to become the market because no one will buy from you. Everyone will just switch to a new coin. Check US history of oil prices. The only miners that are always in profit are mining equipment manufacturers. They get cash from sales and they know that their machines will become obsolete.
- 1 BTC = 1000000 USDT price is possible but no one will be able to cash it out, because there will be no liquidity at such price levels and no sane banks to process it. It is possible because USDT will cost a fraction of USD. Attempting to withdraw at 100% value will cause exchanges and tether to collapse. And there's 2x more tether now with ERC tokens.
- Mining manufacturers, exchanges and corrupt governments will pay large fees to shady banks for coin to USD processing to maintain the vicious cycle and attract new investors. This will work while not everyone wants to withdraw.
- in the future all exchanges will list BTC price in satoshis because common man will be able to buy only a small fraction of BTC such as 10^-8 decimals
- in the future miners will rise fees, fee = 1 BTC or 50% of transaction value could become the new norm. People won't be able to move coins for many reasons.
- The price of any commodity tends to gravitate toward the production cost. If the price is below cost, then production slows down. If the price is above cost, profit can be made by generating and selling more - Satoshi Nakamoto
Check out links:
Stock to Flow model:
digitalik.net/btc/
www.lookintobitcoin....stock-to-flow-model/
https://bytetree.com, featured charts, generation 1 on-chain miners 1st spend chart
Bitcoin Log Regression:
www.youtube.com/watch?v=MpxxioVa...
How The Economic Machine Works:
www.youtube.com/watch?v=PHe0bXAI...
USDT supply
www.tokenanalyst.io/analytics
QUANDL is huge database that stores a lot of statistical and economical data from all over the world. Free quotes from QUANDL are available on TradingView:
QUANDL:BCHAIN/DIFF - bitcoin difficulty
QUANDL:BCHAIN/MIREV - miners' daily revenue
QUANDL:BCHAIN/NADDU - unique bitcoin addresses
QUANDL:BCHAIN/TOTBC - total bitcoins in circulation
QUANDL:BCHAIN/BLCHS - api.blockchain size
P. S.
Gabening intensifies. Alyx is here. It's been only 12 years but feels like yesterday.
On a macro level the Empire is currently building the 3rd Super Star Destroyer with Death Star capabilities to jump even further through hyperspace. There are 3 scenarios:
1. blue (most likely)
2. green
3. red
Miners Capitulation
In a nutshell - undercapitalized miners panic sell because difficulty is too high and mining is no longer profitable, price dumps, longs get squeezed, stop losses cascade, more miners sell.
The capitulation is signaled by a bearish MA crossover on the Hash Ribbons indicator. Last time a Hash Ribbon inversion took place in Nov 2018, when Bitcoin crashed from $6000 to $3000.
The inversion of the Hash Ribbons can lead to a 30-50% drop in the following days, with weeks and months of consolidation prior to an eventual breakout.
If capitulation occurs, subsequent positive momentum (bullish MA crossover) could be taken as a BTC buy signal.
formal cause of the dump: major inflow of 1st spend BTC from some unknown miner's wallet.
_______________________________
Basics of Bitcoin Mining:
- Bitcoin has cycles/epochs. Halving affects miners' revenue in each cycle and therefore the price. This is by design. Hash rate and difficulty adjustments ensure system operation and stability during a cycle. Price converges to a median of a triangle before each halving. It's like having a built in gyroscope. Difficulty adjusts both up and down automatically to counter the Hash Rate increase/decrease.
- Miner's goal is to sell bitcoins at max price and buy new equipment at low price to stay in the game. Therefore miners are incentivized to gather in large pools to be able to control hash power and the market by increasing/slowing down supply production. Built-in scarcity or artificially limited supply production causes the price to go up and attracts new investors - basics of supply/demand. Miners can halt all operations and cause the price to collapse. They can also dump 1 mil coins and crash the market at any given time or kill other coins with compatible protocol using 51% attack. They lobby for changes in the bitcoin protocol.
- Bitcoin is essentially a math formula, it's a sort of self-propelled pyramid scheme that is propagated by miners using investors' money as fuel. It will likely converge and stabilize around a single value or collapse in the long run. You can use it while it works.
- It's a pyramid because to be able to cash out your coins you must have a counter party - someone with fiat to buy bitcoins from you. You won't be able to sell if there's no buyer. Only the first few will. The rest will become bagholders. Or you will sell at 10% of the value. You don't notice this when there's enough liquidity in the market and price goes up which attracts occasional buyers. It's much harder to cash out when price goes down and no one wants to buy and people have to wait for weeks. Those always in profit are service providers that charge fees and control liquidity pools. People with lots of coins usually just donate them or try to run their own exchanges - this is the only way to get cash for coins and fees from trading/listings.
- that's why HODLing is pointless in the long run. Whales need lots of bitcoins only as leverage to be able to trade large positions, shake out the market and cash out occasionally. They can grow capital because they are hedged.
- miners need to sell bitcoins to upgrade the equipment and pay for electricity to be able to continue working. Their profit margin is very small, it reduces exponentially and at certain difficulty levels they go bankrupt like most traders. In the long run 1-2 mining pools will control the whole market. It will become a centralized monopoly. And you don't want to become the market because no one will buy from you. Everyone will just switch to a new coin. Check US history of oil prices. The only miners that are always in profit are mining equipment manufacturers. They get cash from sales and they know that their machines will become obsolete.
- 1 BTC = 1000000 USDT price is possible but no one will be able to cash it out, because there will be no liquidity at such price levels and no sane banks to process it. It is possible because USDT will cost a fraction of USD. Attempting to withdraw at 100% value will cause exchanges and tether to collapse. And there's 2x more tether now with ERC tokens.
- Mining manufacturers, exchanges and corrupt governments will pay large fees to shady banks for coin to USD processing to maintain the vicious cycle and attract new investors. This will work while not everyone wants to withdraw.
- in the future all exchanges will list BTC price in satoshis because common man will be able to buy only a small fraction of BTC such as 10^-8 decimals
- in the future miners will rise fees, fee = 1 BTC or 50% of transaction value could become the new norm. People won't be able to move coins for many reasons.
- The price of any commodity tends to gravitate toward the production cost. If the price is below cost, then production slows down. If the price is above cost, profit can be made by generating and selling more - Satoshi Nakamoto
Check out links:
Stock to Flow model:
digitalik.net/btc/
www.lookintobitcoin....stock-to-flow-model/
https://bytetree.com, featured charts, generation 1 on-chain miners 1st spend chart
Bitcoin Log Regression:
www.youtube.com/watch?v=MpxxioVa...
How The Economic Machine Works:
www.youtube.com/watch?v=PHe0bXAI...
USDT supply
www.tokenanalyst.io/analytics
QUANDL is huge database that stores a lot of statistical and economical data from all over the world. Free quotes from QUANDL are available on TradingView:
QUANDL:BCHAIN/DIFF - bitcoin difficulty
QUANDL:BCHAIN/MIREV - miners' daily revenue
QUANDL:BCHAIN/NADDU - unique bitcoin addresses
QUANDL:BCHAIN/TOTBC - total bitcoins in circulation
QUANDL:BCHAIN/BLCHS - api.blockchain size
P. S.
Gabening intensifies. Alyx is here. It's been only 12 years but feels like yesterday.
Comment:
bearish cross of D1 SMA 30,60 on Hash Ribbons - possible start of miner's capitulation. However there's no cross yet on the W1, just touching the curve. And judging by the history, the D1 cross may also be invalidated in the following week if price/hash rate moves up. Hash Ribbons uses QUANDL Hash Rate quote as source.
Comment:
Converging Bitcoin Price Model 1.1
Comment:
4100 target reached
1. blue line is MIREV - miner's revenue chart, candles - BTCUSD price
2. red arrows mark price spikes before each halving. Each spike is 50% retracement of ATH/ATL of the current cycle and we already had one.
3. MIREV value drops just before each halving because revenue drops - this is by design due to halving. And will drop just before May 2020 again.
4. each time divergence on RSI
5. spikes on both RSI EWO declining over time - suggesting convergence of all cycle tops
6. cycle triangles can become longer over time.
7. Blue scenario - down trend into halving, then bull run (likely), Red scenario - descent into prev cycle range, Green scenario - second price spike at 61.8% before halving (unlikely)
8. Monthly EMA12 26 - aqua and purple. Monthly EMA50 and SMA50 (dotted) - red lines. Monthly EMA12 26 bearish cross (purple circle) and no reversal within the following 1-2 weeks - Red scenario; No Monthly EMA12 26 cross - Blue or Green scenario. In the Blue scenario price will still drop to 4100 level then pull back.
Price is likely to go down into the halving and up after the halving because miners are incentivized to pump into the next cycle to stay in the game. They want to sell at high prices, so longs are paying for the show and future mining equipment.
However, miners may decide to break the halving cycle, dump further to punish longs even more for whatever reason and crash the market (lack of liquidity and cash) - red scenario. Large Miners are probably hedged at the current price for 6 months ahead using futures - ensuring normal operation through such crash. They can also delay the halving by deliberately slowing mining operations. This is probably the reason for the pump front running the halving.
This is not a financial advice, use at your own risk.