The sudden spike in Bitcoin price today has brought the largest cryptocurrency out of the narrow range it has used most of the past week.
Cryptocurrency Prices Sudden Soaring Bitcoin’s price today has taken the largest cryptocurrency out of the narrow range it’s been using most of the past week. The largest digital asset by market value jumped 5.7% to $41,691 before ending its gains in early New York trading. It is down about 12% this year. Other tokens like Ether and Solana also rose. Stocks rose, with Chinese stocks focused on Beijing’s commitment to policies to boost financial markets.
“Whenever we see a slight drop in the stock market, cryptocurrencies tend to perform well,” said Marcus Sotiriou, an analyst at London-based digital asset broker GlobalBlock. , especially recently. “At the end of the day, the main driver of prices is macro, so I expect a struggle to get some sustained upside.”
Billionaire crypto investor Michael Novogratz, head of Galaxy Digital Holdings Ltd., said Tuesday in a television interview on Bloomberg Crypto that a sustained rally is unlikely. Bitcoin is likely to stay in the $30,000 to $50,000 range in an environment of rising interest rates, he said.
Bitcoin has spent the past few days mired in its tightest trading range since October 2020, a phenomenon that some market watchers say long-term holders should buy whenever the cryptocurrency discount. Meanwhile, selling by short-term investors has prevented Bitcoin and other digital assets from achieving sustained gains.
The Fed is poised to raise rates on Wednesday for the first time since 2018, with investors focused on how aggressively central banks plan to tackle the hottest inflation in four decades. century. The Federal Open Market Committee is certain to raise interest rates by a quarter of a percentage point at the conclusion of its two-day policy meeting. The new FOMC projections are likely to suggest four rate hikes in 2022 and three in 2023, according to economists surveyed by Bloomberg.
Cryptocurrency Miners Prepare for Long Winter on Contracts
(Bloomberg) Cryptocurrency miners are looking for the possibility of a squeeze as costs rise, Bitcoin prices fluctuate, and now a war in Ukraine threatens to erode the industry’s substantial profit margins. .
Companies are tapping into the debt market, strengthening their balance sheets and lines of credit, and even filing for stock sales to raise more cash. Marathon Digital Holdings Inc. and Hut 8 Mining Corp. is one of the most recent companies to hit a planned share sale, and a just-in-case move can be justified before Bitcoin price hovers around $41,000.
It’s a tough atmosphere that could see a shift in the industry, reminiscent of the 2018 bear market that saw the price of the world’s largest digital asset crash to nearly $3,000. la. With the Bitcoin price currently moving in the opposite direction of global processing power, the pressure is on. And while profit margins remain above 70% for larger players – making Bitcoin mining one of the most profitable industries, comparable to luxury goods and pharmaceuticals – leaders of some of the biggest companies say they are arming themselves against what-if situations.
“Since I took the helm 16 months ago, we have taken a balance sheet-first approach,” said Hut 8 CEO Jaime Leverton. “I started focusing on diversification knowing that this business is cyclical and because we wanted to make sure we were better prepared for future compression.”
The price of Bitcoin still needs to drop significantly so miners like Hut 8 can even consider significant operational changes or sell their coin reserves. But the magic number, known as the break-even ratio, varies from company to company. Hut’s breakeven rate was just under $18,000 as of their most recent quarter, while Riot Blockchain Inc. has a rate of $10,000 and Marathon as low as $5,000. According to analysts, profit margins exceeded 90% at some companies when Bitcoin was at record highs.
Russian President Vladimir Putin’s invasion of Ukraine has hit global markets, which have already reeled from tightening monetary policy in the face of rising inflation. But it also created a curveball for cryptocurrencies as the fight fueled speculation that digital assets could gain an edge amid uncertainty. Moving up the ladder with Bitcoin, shares of Marathon, Riot, and Hut 8 have all stabilized this month after each fell more than 60% from their November highs.
Rising energy costs due to war put additional pressure on break-even rates, where electricity typically accounts for about half of overall costs. At the same time, a potential drop in mining activity in Russia – similar to when Beijing banned crypto mining and trading – could allow the biggest miners to launch an attack. In fact, Marathon CEO Fred Thiel said he was looking for signs that rigs going offline could potentially reduce the global network’s hash rate, a measure of strength. processing of all miners.
“During this crisis, we will likely see a slight drop in hash rates globally. If you go back to last year, when the shift in China happened, there was a drop of almost 50% for a few months before rising again,” he said.
According to BTIG analyst Greg Lewis, hash rates globally have been particularly volatile since Russia’s invasion of Ukraine, who observed a drop during the first weekend before rising again. He noted that Russia has a 15% share of the global hashing market.
“Miners that keep working, big or small, perform better as the global hash rate falls,” Lewis said. For example, if the global hash rate drops by 50%, regardless of whether a miner owns 1% of the global hash or a fraction of it, each will see his or her hash rate double.
When asked if Bitcoin trading below $20,000 would force companies to chart in a different direction, away from large scale expansion plans this year or toward selling their Bitcoin stockpile. no, Riot Blockchain director Jason Les pointed to the new tools offered during the recent crypto boom. the company’s well-capitalized balance sheet and relatively lower operating costs.
“We plan to continue our existing expansion plans regardless of market conditions,” said Les. “As the industry matures, more and more tools are used by miners to provide financing.”
That’s the difference between the past “nuclear winter,” when the price of Bitcoin plummeted, and the next, whenever possible: new tools. Miners can secure a line of credit fully backed by their digital assets. They can lend, staking and hedging to generate rewards from their coins or hedge them. Plus, a more mainstream and mature industry also allows miners to partner with companies in other industries, like gaming or energy. And they can discover new projects that allow them to mine the Ethereum blockchain while receiving rewards in Bitcoin.
“Our Bitcoin holdings become increasingly valuable as the market matures. Part of our Bitcoin earns profit, it’s pure Ebitda. We can use it as collateral to access the debt market if the need arises,” said Leverton of Hut 8. “I know Michael Saylor made it famous, but we are the OG of giddy.”
That means the biggest, diversified miners are clinging to their coins, even as prices drop, and keep plugging in new equipment, or “lighting the rig” as they say, so they can mine. more extraction, at a faster rate.
Marathon’s Thiel said: “For us, it’s the stepping stone to the floor and growing. Indeed, an early earnings report showed Bitcoin production was lower than expected in November due to maintenance issues, but mining costs in Q4 were better than expected.
