Bitcoin’s bottom might not be in, but miners say it ‘has always made gains over any 4-year period’

Your favorite trader says Bitcoin (BTC), has bottomed. The top on-chain analysts and indicators are also pointing to the current price range as an opportunity for a “generational purchase”. Many crypto- and finance media reported recently that Bitcoin miners sent a lot of coins to exchanges, which is a sign that $17600 was the capitulation move that pinned the market bottom.

Although there is a lot of assurity from Crypto Twitter’s various anon and doxed analyst, Bitcoin price is still clearly in a downtrend and the metrics don’t fully reflect that traders buy every dip.

Investors often overlook the vital component of Bitcoin price. Cointelegraph spoke with Rich Ferolo, Blockware Solutions, and Will Szamosszegi, of Sazmining Inc. in order to get clarity about what is happening in the mining sector and how it might affect market sentiment moving forward.

Cointelegraph: Bitcoin is at its lowest point. Nearly two weeks ago, the price reached $17,600. It’s beginning to feel like the fund driven capitulation armageddon may be over. Thoughts?

Will Szamosszegi says: It is impossible to know if Bitcoin has reached a bottom. In general, I recommend a dollar-cost-averaging strategy to people: Just buy however much Bitcoin you feel comfortable with on a consistent schedule. There have been drawdowns that were even greater than this, such as 93.7% during its early days and 83.44% in 2018. Bitcoin has never lost money over a four-year period.

CT: Bitcoin trades below its realized price and below the miners’ production cost. The price has also fallen below its previous record high, and the hashrate is falling. These metrics are often cited by on-chain analysts as a sign of a future buying opportunity. But is it true?

Rich Ferolo, Blockware: We’ve done extensive research and calculated the breakeven price for machines as far back 2016 as the s9, at $.07/kilowatt. This breakseven price is $38,000 per s9. There will be older machines eventually removed from the network. BTC should be around $18,000 for the s17s at $.07 per kilowatt.

The efficiency of new machines is higher and hash rate adjustment and difficulty are declining for current generation machines. However, machines that are above 90 Terahashes (TH/s), can still make it. Inefficient machines are those that consume less than 34 Watts per Terahash.

The value of machines is decreasing is one factor to be aware of. Even if Bitcoin prices rise, there is a symbiotic relationship that affects Bitcoin prices and other crypto market prices.

Machines are valuable assets. The machine is the most important aspect of mining. Bitmain and MicroBT adjust the prices when BTC goes up. This hard asset earns yield every day in the same way as BTC.

If you are in the long-term game, you won’t be concerned about the current BTC price. The BTC price falling doesn’t necessarily mean that all miners will fall. It’s about survival of the fittest. It’s important to be aware and alert to macros. However, it’s not as difficult as you might think. There are many perspectives and situations that can be applied depending on the size of your outfit. Even though they receive $.05 per Kilowatt, big public companies must consider many operational factors. Their model is not the same as the analysis of an average miner, outside of the public user.

CT: What’s the current state of the BTC mining sector? Rumours abound that leveraged miners may go under, inefficient miners might turn off, and equipment prices are being sold at 50% to 65% below 2020-2021 prices.

What is happening behind-the scenes? How will this affect the industry over the next six months or a year.

RF: All of your observations are correct. The market is reducing the mining debt and we are at a price consolidation point. It might be possible to keep the difficulty and hash rate at bay if you can keep mining. Blockworks believes there is a serious lack of infrastructure in this area. You need to invest a lot of CAPEX in order to build infrastructure. Infrastructure is an issue.

There isn’t much space available for hosting machines, regardless of how many there are. You’ll see a lot more capitulation, insolvency, and excessive machines from a broader perspective. Many of the major players have put a halt to funding miners. This is a positive for those who want to get into the space. However, we forecasted a 60% increase in hashrate in 2022 during boom times. The hashrate will rise as more s19XPs are available.

WS:These cycles are well-known to many veterans working in the Bitcoin space. The price dropping hashrate is a common pattern in the past. Newer miners are often forced to leave in drawdowns such as this. However, the network continues to grow. Mining will become more competitive over the next six months as larger players consolidate and purchase miners at a discounted price.

CT: Why is it a good time or a bad time to mine? Is there any specific on-chain metrics or profitability metrics miners are interested in or is it obvious that Bitcoin’s current price makes mining attractive?

Let’s suppose I have $1,000,000 cash. Would it be a good idea to start mining and set up an operation? How about $400,000 to $100,000? It might be worth setting up a home mining operation or using a hosted service to mine at a cost of $40,000 to $10,000.

RF: I don’t believe any of these values would justify you wanting to build infrastructure on a large scale, regardless of how much it is. You can buy 200 machines worth a million dollars at $5,000 each machine, which is almost 0.6 megawatts. 300 machines can be powered by 1 megawatt. It is very different to house 200 machines than it is to house 2-10 machines. If you are serious about mining, you will want to diversify your $1 million to $300,000. That’s 60 machines.

Mining is a hedge. I would take 60% of capital to buy machines and 40% to buy spot BTC. This amounts to 60% CAPEX for machines, 20% OPEX, and 20% spot BTC. Hosting is another option. You can host 20 machines for $100,000, or you could use the same strategy. This amount of power is not possible for most residential homes. You need to know how much power your home can handle without causing disruption to the surrounding area.

At-home mining is easier in the $10,000 to $40,000 price range. Depending on the price, you can pull it if your power rate is below $.10 Eight machines will cost you $40,000 To be fair, that’s more achievable. If you test the waters with four to five machines, it’s approximately 24.4 kilowatts an hour. It’s almost like dollar-cost-averaging into machines and buying them if prices continue to drop.

Related: Start mining Bitcoin? HashWorks CEO cites ‘attractive investment return’ in BTC mining

CT: Will a drop in the price of Bitcoin to below its record high ever have significant future implications for the industry and the fundamentals?

WS: BTC’s fundamentals are unaltered, which is why I expect it to become a global reserve asset. This crash will teach the industry: Don’t be too leveraged and don’t offer yields that make you vulnerable.

RF: That’s a great question. I believe it was predicted based on the last cycle’s purchases by retail. The smart money predicted a long bearish market, but it was unexpected how quickly it happened. The long-awaited blowoff top was never realized.

Due to recent implosions, crypto has received a lot of publicity and bad press. We’ll see more as the news loves bad media and is easier to generate. BTC believers will ignore it. It’s the perfect time to invest and buy in the space, particularly after all of the negative energy has been cleared.

Many people have likely sold the bottom and will not be back. However, this is the fundamental market dynamics.

CT: In 676 days, the network’s next reward-halving event is expected. How will this change the industrialized mining landscape and the equipment needed to solve an algorithm that becomes more difficult with each halving?

RF: Miner capitulation is often caused by halving events. It’s surprising that the current hashrate has not fallen further. We are not seeing the sharp decline that was expected, such as 20% to 25%. Older-generation machines must unplug, which is costly. However, the expected hash rate rise that comes with each halving will benefit them in the short-term. When OPEX is not favorable, miners unplug and plug back in when it is.

WS:Miners will seek to lower their costs as the Bitcoin reward could make many mining operations unprofitable (assuming that Bitcoin prices remain constant in US dollars). The efficiency of mining equipment will improve and miners will continue looking for the most cost-effective energy options. Because it eliminates inefficiencies, halving is one of many great features of Bitcoin.

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