In the 27th issue of the Broker’s Beat, we discuss some new regulations, as well as mining revenue increases as we dive into the slowly rising price of Bitcoin.
Source: Finance Magnates
“Even though we are less than five weeks into 2021, it has already been a huge year for crypto.
Indeed, Bitcoin and many other cryptocurrencies hit new all-time highs since January 1st. Beyond that, events like the Capitol Riots and WallStreetBets’ Big Short Squeeze have changed the conversation around crypto.”
“Bitcoin miners generated an estimated $1.1 billion in revenue in January, up 62% from December, according to on-chain data from Coin Metrics analyzed by CoinDesk.”
“Michael Green, chief strategist and partner at investment advisory firm Logica Capital, sounded the alarm about China’s Bitcoin (BTC) mining dominance during a debate with crypto proponent Anthony Pompliano.”
“The global exchange announced early today at its virtual event, Binance Blockchain Week, that last Friday it had sneakily launched a beta version of Binance Pay, its answer to PayPal.”
The price of Bitcoin has been increasing from the start of the month and came up from $32,205 at its open to $38,370 at its highest point so far, which was an increase of around 19%. After it came up to those levels today it started decreasing and is currently being traded at $36,700.
On the hourly chart, you can see that this was a continuation of the upward movement after a breakout was made from the descending triangle that started forming from the 10th of January when the price made the all-time high.
The price broke the triangle in an impulsive manner and fell back to its resistance level for a test of support. As support was present there was another round of bullish pressure pushing the price further up to the levels of the prior high where it got rejected again, forming a double top formation.
As the price was in a corrective stage since the 10th of January this breakout could be the start of the next upward impulse that is going to lead the price into further highs. However, it could also be the continuation of the corrective structure that would be a more complex count and would mark the midpoint of the corrective formation.
Now as the price is in a downward trajectory we are going to receive the validation for either scenario. If the price is going to continue moving to the upside it most likely going to find support somewhere around $35,200 area. But if it goes below those levels it is likely to continue moving further down as the correction of the higher degree continues.
Mining distribution has become a much more interesting question in the last few months as revenues have continued to climb, increasing the stakes in turn.
It is estimated that last month (January) yielded revenues about 62% higher than those of December. This is based on the assumption that miners are immediately selling their holdings, but is still a very aggressive increase that will likely increase competition.
A large part of this is being fuelled by fee revenue, which adds the right incentives for long-term investment in the space.
Of course, this brings us back to the bigger question of whether Bitcoin’s network is secure while China is hosting so much of the hash power. In a recent debate over the future of Bitcoin, strategist Michael Green pointed out that if China just “turned off” Bitcoin, they would lose only $7 billion a year in revenue, which really isn’t much for a nation-state.
Additionally, he pointed out that China, Russia, and Iran collectively controlled about 90% of the hash rate, which was very concerning.
We think that the need for better incentives in the West that make it easier for miners to set up shop will be increasingly important in the future, and this just confirms the urgency behind it.
The total estimated number of terahashes per second of the Bitcoin network has been in a decline as well and came down from 152.81M at the start of the month to 146.547M today.
After reaching an all-time high on the 17th of January, coming to 155.416M it made a pullback to 144.29M but then again made an attempt to continue moving to the upside. As it failed to do so now it’s making another pullback which could result in a lower low compared to the prior local one which would indicate that the miners are allocating their hash power elsewhere. But since it is still on a higher low this could be a temporary correction before another all-time high is made in February.
Contrary to the previous chart, the chart of miners revenue is showing positive signs as it made a rise from 30.096M on the 1st of February to 39.131M where it’s currently sitting.
We have seen the valuation pulling back to its horizontal support level which was tested for the third time at the start of the month, and as there was still significant support there it started increasing again. It didn’t make a higher high compared to the January 29th one but is looking like it is getting ready to do so shortly.
This has been a heck of a week. Price-wise, we’ve seen ETH hit all-time highs in the $1,600s (at the time of writing this). BTC seems to be heading into a bullish run as well.
Looking past the price, there are a few other indicators that have got us paying attention. First of all, we always say that institutional buying is the strongest bullish signal. Regardless of any bearish signals on the market, if institutional buyers are piling in, we are rarely going to bet against them.
So this week when we saw a significant 10%+ rise in the outflows of BTC from Coinbase Pro, we thought that was a bullish signal. Then when $552M of stablecoins flowed into the exchanges, we got very excited.
These are all extremely bullish signals and they are strengthened by the observation that FTT and BNB have been rapidly rising as well. Centralized exchanges will always attract the “new” money, so seeing FTX’s and Binance’s exchange tokens increase in price is very encouraging.
We don’t predict the future, but we can say that the next week will likely be very exciting as we head into some new ATHs across the sector.
Every week, we release research that covers a wide swath of topics. Already this week, we’ve released what we think is a great report on the investment thesis for Bitcoin.
Tomorrow, we’ll have a report coming out on the Healthcare Industry. However, if you’re only on the Broker’s Beat list, you won’t receive this. To opt-in for reports like this to be sent right to your inbox, subscribe here!