Max Bibeau, Preston Sledge, Matthew Kimmell
Watch the live Bitcoin halving clock!
In celebration of the upcoming halving, we have primarily dedicated this edition of State of the Market to developments in the mining community. Enjoy!
Market Summary
Dotted lines represent non-trading days (weekends, holidays, etc.)
Top Stories
10 Days To Go Until The Bitcoin Halving
If you’ve been reading SOTM the past few weeks, you know the long-awaited halving is finally about to happen. This event occurs approximately once every 4 years, and has the potential to drastically change Bitcoin’s supply, but also the profitability and distribution of mining. This article gives a great synopsis of what the halving is, and where experts disagree on how this event could affect Bitcoin.
Miner Survivability Post-Halving: A Hash Rate Comparison
One commonly cited fear of the halving event is that many smaller miners could be driven out of business by the halving of the block reward. This article from CoinTelegraph provides a slightly more technical analysis of the halving event, examining how Bitcoin’s hashrate is distributed between miners of different scales. This data is then used to draw the shocking conclusion that between 15-30% of Bitcoin miners may be forced to shut down or run at a loss post-halving.
Binance Launches Crypto Mining Pool Amid Centralization Concerns
Binance, the largest cryptocurrency exchange in the world, has officially launched their mining pool. Mining pools are organizations that bring many smaller miners together and distribute the profits, allowing for more consistent earnings based on how much processing power an individual is contributing. While mining pools are generally viewed favorably, the sheer scale of Binance’s pool is leaving many extremely wary of centralization within the blockchain, which could potentially compromise Bitcoin’s immutability. Binance, however, claims that this pool will bring increased distribution to the blockchain by offering many competing pool options for smaller miners.
DeFi Platform Compound Approves Interest Rate Upgrade In Historic Vote
You may remember Compound from a previous version of SOTM (#45), where we discussed how the company is transitioning to a new form of governance based on token share. Token holders are able to “suggest, debate, and implement changes to Compound — without relying on, or requiring, our team whatsoever.” The new system was still in developmental stages, but now it is being actively used. Dharma, a decentralized finance app, proposed the first upgrade proposal which hoped to change the interest rate model for a stablecoin known as cDai (Compound Dai). The proposal passed on April 30th, and is now in full effect. This is the first example of “a major DeFi product [approving] an upgrade proposal conceived and developed entirely by users of the protocol and not the core development team or a supporting foundation.”
Alibaba Earns US Patent to Bring Blockchain Technology to the Music Industry
Alibaba, a Chinese e-commerce giant, has filed (and secured) a patent on a blockchain-based music “originality analysis.” According to the patent, “a node would analyze the lyrics, tempo and tune of a song and then compare the results to a music catalog to determine whether it is original.” The data is added to the blockchain, where other nodes continue to analyze other unnamed “musical factors” until the “originality” of the song is determined. This is another fascinating application of blockchain in an industry plagued by plagiarism and copyright infringement.
Top Charts
A key component of Bitcoin’s functionality is miners. However, mining Bitcoin can be extremely expensive and intimidating, especially for new users. All of this week’s charts are sourced from Genesis Mining’s The State of Mining 2020 Report, which conducted a March 17th survey of 750 individuals who either own Bitcoin or have owned Bitcoin in the past.
What has been your personal experience with Bitcoin mining?
Surprisingly, more than half of respondents either currently or previously mined Bitcoin, or purchased a cloud mining contract. Given how technically demanding mining can be, it is impressive this many individuals have taken a shot at it. Bitcoin’s decentralization relies on there being a large network of miners all around the world, which seems to be thriving based on this information.
If you previously mined Bitcoin but don’t anymore, what caused you to stop?
Mining being too time consuming is by far the most common reason that respondents cited for no longer mining Bitcoin. This graph surprised me as well, because Bitcoin mining is not usually considered abnormally laborious once set up. I expected hardware becoming irrelevant to be the major reason people stopped mining, as there has been an explosion in the amount of processing power required to profitably mine in recent years.
What do you expect to happen after the upcoming “halving” for the following few months?
While this graph should be looked at as nothing more than an interesting survey of opinions, it does demonstrate a shocking level of optimism within the Bitcoin community as the halving draws ever-closer. The halving will have a huge impact on the mining community, with many potential long-term changes to how distributed the network is and how profitable mining can be.
Where do you think Bitcoin mining is headed?
Again, while this graph is merely a survey of user opinion, it is fascinating that people seem very uncertain about which direction the mining space is headed. Especially with the upcoming halving, there’s a lot of FUD regarding centralization of mining.
Finally, it has been reported that China makes up the majority of Bitcoin mining. How do you feel about this?
A whopping 60.8% of respondents exhibited some level of concern regarding China being a potential mining powerhouse. It will be interesting to see if this concern leads to a resurgence in American mining, or if Americans will simply come to terms with China’s leading in network power.
Top Tweets
@elonmusk says he thinks that his company’s stock price is too high. Investors agreed, crashing the price by ~10%.
@Crypto_Bitlord keeping @Bitcoin in check.
The memes… they’re… evolving.
Stay safe out there.
Debt/GDP measures how much new credit is issued vs. the total output of goods and services. Coronavirus is causing a higher debt/GDP ratio as output is decreasing. At the same time, unemployment and a widespread lack of demand is causing the velocity of money to decrease. Velocity measures the rate at which money is spent. MV = PQ. Money supply (M) has been increasing rapidly. In conclusion, prices (P) finna increase. However, if newly printed money is used to pay off debt, the money supply remains constant. This can curtail the rise of prices.
From @cyphernormie.
The efficient market hypothesis is something we’re actually taught to believe.
@stoolpresidente, CEO of Barstool, continues to make sick gainz in the stonk market. The guy is genuinely baffled by how he keeps making money. Despite this, @jimcramer, host of Mad Money on CNBC, suggests Portnoy is the next Warren Buffett.
@RiverFinancial reminds people what happened the last time a store of value threatened the wealth of banks during a crisis.
Bitmex is one of the largest and most controversial exchanges offering crypto derivatives. Last month, the price of Bitcoin dropped by >40% in a day. During the carnage, Bitmex shut down its platform. Immediately, the price of Bitcoin recovered, and ever since then Bitmex’s liquidation engine has been called into question. Recently, Bitmex has lost market share to competitors like CME, Binance, FTX, and Bybit.
“Even those of us in stable economies are increasingly skeptical of the government’s ability to manage the money supply.” Andreessen Horowitz manages over $10B in assets, investing in tech giants like Facebook, Lyft, and Stripe. Now, they are leading a $515M fund to invest in key areas of cryptocurrency. Smart money knows that money printer go brrr means orange coin good.
@adam3us, CEO of Blockstream, explains the tradeoffs between Bitcoin vs. Lightning vs. Liquid. Lightning and Liquid are protocols built on top of Bitcoin to improve the scalability of transactions. Here, Adam Back suggests that Lighting > Liquid for speed and censorship-resistance, but Liquid > Lightning for security and confidentiality.
@AgePositiv breaks down food supply chain logistics for @bitcoinbella_.
From @Emerald_dll.
When Dad buys a $100 subscription to Motley Fool, it might be the top. From @nerdjpg.
Oh, how convenient for me as an investor.
Top Videos
This video explains what the Bitcoin halving is. This video explains why it’s important (MUST WATCH).
COVID-19 is wreaking havoc on the world economy. Watch this CoinTelegraph video of crypto-specific industry leaders explaining how the coronavirus is affecting them and their businesses.
Check out the Dr. Erickson briefing on COVID-19 before the video disappears again.
“A demonstration in Lebanon has recreated the Ghanian dance funeral meme IRL to announce the death of the local currency, which is off more than 60% since late last year.” Too good.
Vladimir Putin understands the power of cryptocurrency.
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Texas Blockchain’s ‘State of the Market’ is a student-led editorial. None of the views expressed by the authors should be taken as the view of the University of Texas at Austin or the Texas Blockchain organization. Furthermore, none of the views expressed should be taken as financial advice in any circumstance.