The Federal Reserve appears ready to pursue yet another untestedstrategy that could ultimately boost inflation and possibly prices for bitcoin.

The Fedis preparing to effectively abandon its strategy of pre-emptively lifting interest rates to head off higher inflation,according to a new report in theWall Street Journal.

The shift signals an explicit willingness by the central bankto tolerate higher inflation, at a time when the spreading coronavirus continues to ravage the economy. TheU.S.unemployment rate stands at11%, a levelnot witnessed since the early 1940s until this year.

TheFeds extra loosening ofmonetary policycould help support prices for bitcoin, which many cryptocurrency investors speculate could serve as an effective hedge against inflation, similar to gold. Bitcoin prices have already soared 58% this year, beating silvers 36% andgolds 30%, not to mention the 2% gain in the Standard & Poors 500 Index of large stocks.

Bitcoin rose 1.5% on Monday to $11,338.

As more investors look to digital goldas an inflation hedge in an increasingly digitized world amidst unprecedented government money printing, the cryptocurrency research firm Messari wrote Monday, we know that it wont take much of an institutional allocation until $50,000 bitcoin is back on the table.

The Fedalready has taken monetary policy to a new level of extraordinary this year,pumpingnearly $3 trillion of freshly created money into financial markets earlier and pushing its total assets to about $7 trillion.A growing number of investorsin both digital-asset and traditional markets say theflood of dollars could whittle downthe U.S. currencys purchasing power.

The dollar index, a gauge of the the currencys strength in foreign exchange markets, fell 4% in July, thebiggest monthly dropsince 2010. And the Wall Street brokerage firm Jefferies now predicts that the dollar could fall as much as 15%, according to CNBC.

Bank of America analysts wrote Monday in a report that its becoming a popular trade to bet against the dollar, since investors are worried about the long-term impact of the rapid accumulation of U.S. debt for the U.S. dollars reserve-currency status.

As gold, silver, equities, and long bonds reach record high levels, and the U.S. dollar slumps, the king of cryptocurrenciesmay be back in the spotlight for the foreseeable future,Jeff Dorman, chief investment officer of the cryptocurrency-focused firm Arca, wrote Monday in a weekly blog.

Under the Feds policy shift, according to the Wall Street Journal, the central bankwould allow inflation to drift above a 2% target before raising rates. The idea is that above-target inflation would offsetperiods where consumer price increases were previously below the mark, as has been the case for most of the past two decades.

The goal is not to increase inflation per se, but to provide assurances to investors that interest rates would remain lowfor a long time, according to the paper. Such accommodation could help to assure a faster economic recovery.

Yet, higher inflation could further distortalready uncanny signals emanating from bond markets, further undermining the dollars attractiveness. Nominal yields on 10-year U.S. Treasury bonds are currently around 0.6%, close to historic lows. Once inflation is factored in, thereal yields equate tonegative 1%.

Assuming nominal yields dont rise much anytime soon, an inflation rate above 2% would cause bond investors to fall even further behind.

Negative real rates imply a loss in purchasing power from holding U.S. Treasuries,the ideal conditions for non-income producing assets such as gold and silver but also crypto assets like bitcoin, the analysis firm Delphi Digital wrote on July 31.

Theres some risk that a fresh panic in markets might prompt investors to rush back into dollars, which couldmeana redux of the March crash inbitcoin prices.

But according to an Aug. 2 Bloomberg News story, the next risk-off scenario might not see investors rushing into dollars, due to theflood of liquidity unleashed by the Fed.

Any haven rally is likely to be shallower than in previous years, according to the report, while the possible extent of depreciation remains the same.

Everything hinges on the dollar right now, Mati Greenspan, founder of the cryptocurrency-focused research firm Quantum Economics, wrote Monday in an emailto subscribers.

Tweet of the day

Bitcoin watch

BTC: Price: $11,186 (BPI) | 24-Hr High: $11,480 | 24-Hr Low: $11,164

Trend:Bitcoin is again struggling to find a foothold above $11,400 amid signs of buyer exhaustion on the three-day chart.

The number one cryptocurrency by market value is currently trading near $11,290, having hit a high of $11,424 during the Asian trading hours. Tuesday is the second straight day of bull failure above $11,400. Prices hit a high of $11,480 on Monday, but printed a UTC close below $11,240.

Essentially, bitcoins recovery rally from Sundays flash crash low of $10,659 has stalled with the area above $11,400 acting as stiff resistance.

The bulls need quick progress now, or the focus would shift to the uptrend exhaustion signaled by a major doji candle seen on the three-day chart.

A doji occurs when prices see two-way business during a specific period. While it is usually considered a sign of indecision, in this case, it has appeared following a notable rally to 11-month highs above $12,100. As such, it represents buyer fatigue.

The three-day charts relative strength index (RSI) is also reporting overbought conditions with an above-70 reading. Thus, a pullback to $11,000 cant be ruled out. A move below that psychological support would expose the former hurdle-turned-support at $10,500 (February high).

Alternatively, a sustained move above $11,400 on the hourly chart would strengthen the case for a re-test of recent highs above $12,000.

The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.

Read the original here:
First Mover: As Fed Nears Inflation Rubicon, Analysts See $50K Bitcoin in Play - CoinDesk - CoinDesk

Researchers from the Technical University of Munich (TUM) have analyzed 20 cryptocurrenciesaccounting for more than 98% of the total market capitalization of cryptocurrenciesand found that Bitcoin accounts for 2/3 of the total energy consumption of cryptocurrencies. Understudied cryptocurrencies represent the remaining 1/3. Their paper is published in the journal Joule.

Bitcoin is a digital currency based on a cryptographically secured distributed ledger; it is the first and best-known blockchain application. Bitcoin relies on a computationally intensive validation process called mining that requires specific hardware and considerable amounts of electricity to reach consensus about ownership and transactions.

Estimates of Bitcoin energy consumption based on different methodologies and assumptions, 20172020. Energy consumption is presented in gigawatt (GW). Gallersdrfer et al.

However, the authors note, most studies have been focusing exclusively on Bitcoin and have ignored the more than 500 further mineable coins and tokens. In the Joule paper, the researchers analyze 20 cryptocurrencies, which account for more than 98% of the total market capitalization of cryptocurrencies.

To estimate the energy consumption of cryptocurrencies beyond Bitcoin, we resort to a methodology proposed by Krause and Tolaymatthat employs hash rates of cryptocurrency networks and suitable mining devices. Hash rates measure the processing power; they describe the number of attempts per second to solve a block in the so-called proof-of-work mining process.

Based on the underlying algorithms, current hash rates, and suitable mining devices, we conclude that Bitcoin accounts for 2/3 of the total energy consumption, and understudied cryptocurrencies represent the remaining 1/3. Therefore, understudied currencies add nearly 50% on top of Bitcoins energy hunger, which already alone may cause considerable environmental damage. Including the remaining hundreds of mineable coins and tokens, which account for the 1.77% market capitalization not captured by the top 20, would further increase the share of energy consumption caused by cryptocurrencies besides Bitcoin.

Gallersdrfer et al.

Resources

Gallersdrfer et al. (2020) Energy Consumption of Cryptocurrencies Beyond Bitcoin, Joule (2020) doi: 10.1016/j.joule.2020.07.013

Original post:
TUM team finds Bitcoin accounts for 2/3 of total energy consumption of cryptocurrencies - Green Car Congress

More than 90% of ETHs circulating supply is now in profit. The last time this level was observed was in early 2018 when the price of the cryptocurrency was $925.

Research and analytics firm Glassnode reported Monday that the percentage of ETHs supply in profit has reached a level not seen since early 2018. The firm tweeted:

Over 90% of the circulating ETH supply is now in a state of profit, i.e. the current price is higher compared to the price at the time the coins last moved.

Last time this we saw this level was in Feb 2018 when the ETH price was at $925, the firm continued. The price of ETH has been surging significantly over the past weeks, rising about 47% since July 23. At the time of this writing, the price of ETH stands at $390.63, having breached the $400 mark.

Anthony Sassano, co-founder of Ethhub.io, believes that At this stage of the cycle Id say that its very bullish, he tweeted, emphasizing that Over 90% of the current supply of ETH is now considered in the money aka in profit.

The Spartan Groups co-founder, Kelvin Koh, commented: The strong move in ethereum has to do with the upcoming ETH 2.0 launch which is a major catalyst. Every phase of ETH 2.0 over the next 2-3 years brings Ethereum closer to its final state and will be catalysts for ETH.

Furthermore, news.Bitcoin.com recently reported that the total value locked within the decentralized finance (defi) ecosystem had surpassed $4.22 billion. The value is currently at $4.32 billion. A very large portion of defi applications, tokens, and platforms are hosted on the Ethereum network; defis massive growth has contributed to the significant rise in the price of ETH.

What do you think about 90% of ETHs supply being in profit? Let us know in the comments section below.

Image Credits: Shutterstock, Pixabay, Wiki Commons, Glassnode, Intotheblock

Disclaimer: This article is for informational purposes only. It is not a direct offer or solicitation of an offer to buy or sell, or a recommendation or endorsement of any products, services, or companies. Bitcoin.com does not provide investment, tax, legal, or accounting advice. Neither the company nor the author is responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any content, goods or services mentioned in this article.

Read this article:
Over 90% of ETH's Supply Now in Profit | Markets and Prices Bitcoin News - Bitcoin News

The rain has come. The machines are humming. This should be the best time of the year for Chinas bitcoin miners. The monsoon season, generally from June to October, brings excessive rain and thus cheap hydro electricity.

But this year is different, proving to be harder than ever for Chinas bitcoin miners and mining farm operators who are estimated to dominate 65% of the global multi-billion dollar bitcoin mining industry.

Since last summer, many mining farm operators rushed to build new facilities in Chinas southwestern region in anticipation of a dramatic price rise with bitcoins halving.

But mining difficulty has now almost doubled compared to the monsoon season last year, while block rewards have halved, meaning it is more difficult to mine, with less rewards. Bitcoin miners that have entered the market since last year have to wait much longer to see a return on their investment in mining hardware and facilities.

Thomas Heller, global business director of mining pool F2Pool, summarized the situation in a recent blog post: Were halfway through 2020 and the mining industry has already faced several enormous challenges.

Miners had to battle off the macroeconomic black swan of March, pass through the smoke of the halving and a pandemic, and now theyre gearing up for the rest of the years competitive battlefield, he wrote.

A year with a bitcoin halving and global epidemic rolled into one, its truly one of a kind.

Harder than ever

Many miners expected bitcoins price to rise sharply after the halving, said Kevin Pan, CEO and co-founder of the China-based PoolIn, one of the two biggest bitcoin mining pools in the world (along with F2Pool).

In reality, not only there was not much price momentum driven by halving, there came the mega sell-off on March 12, which caused a large scale of forced liquidation and loss, he said.

For two months after halving, bitcoins price largely remained static around $9,000. Although it jumped above $10,000 last week and is now changing hands over $11,000, it is still at a similar price level seen at this time last year.

In contrast, the networks mining difficulty rose to an all-time-level within two months after halving. Its now almost twice as difficult to mine bitcoin compared to last July, while block rewards have halved.

Without a significant price breakout, bitcoin miners daily revenue has dropped by 70% compared to last year, said Pan, although the recent bitcoin price jump has helped improving the situation.

Indeed, Bitinfocharts data shows bitcoins daily mining revenue was around $0.33 per one terahashes second (TH/s) of computing power in July 2019. It has since then declined to now around $0.1 per TH/s.

Overcapacity

Meanwhile, a surge in interest and investment in bitcoin mining since last year have led to a surplus of newly constructed mining facilities in China.

In April, the oversupply issue had already shifted the hosting business from a sellers market to a buyers market, with mining farms generally offering a 20% electricity discount compared to last year.

Pan estimates that during this rainy season, 20% to 30% of mining facility capacity in Sichuan and Yunnan provinces still remains unused.

To be clear, bitcoin miners and mining farms can still make a profit. But they have to endure a much longer period than expected to break even on their investments.

A payback period of six months to a year used to be common for bitcoin miners in China, but if bitcoin maintains its current prices around $11,000, that could be extended to as long as two years.

In the eyes of many old Chinese miners, the electricity price right now is not only lower than the similar situation of the halving and hydro season in 2016, but also even lower than the electricity prices during the 2015 bear market, said Heller of F2Pool.

Lower electricity may be appealing to miners, but it also means mining farm operators are facing an unprecedented investment challenge as the business shifted to a buyers market, Heller said.

Long-term bullish

Despite this years tough market environment, some are still bullish over the long term and are rolling out products to attract investors. Jiang Zhuoer, CEO and founder of mining pool BTC.Top who also runs his own mining farms, recently launched joint-mining contracts dubbed B.top.

It essentially sells mining equipment by TH/s and farm electricity at cost to retailers who want to participate in mining. The company will not charge customers hosting and management fees until the mining profits they receive break even on their investment.

HashAge and Heng Jia, two long-running bitcoin mining farm operators with over a dozen facilities in Sichuan, also announced a partnership with Chinese crypto lending startup Babel last Friday.

Flex Yang, CEO and co-founder of Babel, said the firm is allocating up to $50 million in USDT as a loan for those who choose to host their miners at HashAge and Heng Jias facilities.

In contrast to previous crypto loans that require borrowers to pledge bitcoin as collateral, this new partnership accepts debtors miners hosted at HashAge and Heng Jia as collateral.

This effort is also one of the industrys first in terms of treating specialized mining equipment, known as ASIC miners, as a tradable asset in crypto-based debt financing.

Luxor, a U.S.-based mining pool, rolled out a bitcoin hashrate price index earlier last month in an effort to provide better transparency into the traditionally opaque market of how much bitcoin mining equipment is changing hands.

Floods

But rain cuts both ways for the mining industry. Flooding in China is among the worst in decades, and has affected over 50 million residents, with nearly four million people displaced and over 150 dead or missing.

The good news is it could have been much worse. Pan said the flood has so far mainly affected the middle and lower reaches of the Yangtze river.

Since most mining farms in Sichuan and Yunnan are located along the upper reaches in the mountain area, which are some 1,200 km, or 800 miles, away from the middle reaches, there are fewer instances where facilities are directly flooded due to the rainfall.

But Pan said there have been more regular instances of mining farms hydropower plants temporarily cutting off electricity generation because the increasing water reserve levels would otherwise cause pressure on the dam.

The places that are suffering the most severe damage so far are provinces in Central China including Jiangxi, Hubei, Hunan and Anhui provinces, as illustrated in this multimedia article from the South China Morning Post.

Johnson Xu, chief analyst at Beijing-based research startup TokenInsight, said mining farm operators nowadays are more experienced in choosing the right location for construction, after witnessing events in previous years where facilities were destroyed by floods and mudslides.

Chinese mining farms have already conducted thorough due diligence to pick the locations where potential flooding risk is minimal, so the floods havent caused a major impact on the mining community, said Xu.

Tug of war

Another reason why there are too many bitcoin mining farms is the push by local governments in Sichuan for establishing the so-called Demonstration Zone for Utilizing Excessive Hydropower Electricity since late last year.

Mining farms and hydropower plants that choose to be based in these industrial parks can typically enjoy a stable operational environment with a steady and cheap power supply. In return, they give a portion of their profits to local governments as well as Chinas State Grid, the state-owned utility monopoly.

In previous years, many mining farms in Sichuan and Yunnan have been using whats called direct-supply electricity. That means power plants sell electricity directly to mining farm operators without having to share the profits with other parties.

As local governments have stepped up efforts to rectify the direct-supply model adopted by many power plants, this has created a sort of tug of war among local governments, hydropower plants as well as the State Grid, Pan said.

Some bitcoin mining farm operators using direct-supply electricity wish to sell their facilities at a low valuation given tough market conditions. This tug-of-war will continue to be a risk factor for potential investors in those mining farms.

Overall, the latest regulatory policies in China tend to have a negative impact on those unregulated smaller mining farms, but positive towards firms who meet the local regulatory requirements, Xu added.

The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.

Here is the original post:
Chinese Bitcoin Miners Face Tougher Than Ever Rainy Season in 2020 - CoinDesk - CoinDesk