Bitcoin Plunges Eliminating Some Miners Before Halving, Could It Be Bullish in the Long Term?

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Wanguba Muriuki
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In recent months, Bitcoin price has slowly descended from the 2019 high of $13,880 to the current levels of just above $8,130. This plunge is beginning to put weak miners out of business. In the past week, Bitcoin’s mining difficulty plunged 7% abruptly. That drop enabled miners to easily solve algorithms and mine blocks.

That development means that the weak miners and those that encounter high operating costs are constantly going out of business. The new move does not go well with the bitcoin HODLers because capitulating miners usher in a major bitcoin dump.

On the bright side, the expected selloff will be nothing more than a shakeout. Therefore, a bitcoin network featuring highly-efficient miners will probably curb the number of sellers after the May 2020 halving.

Bitcoin Turns Bearish Before Halving

Bitcoin halving ranks among the most bullish events that hit the cryptocurrency space. That is the time when the block rewards are cut in half. During the first bitcoin halving event in 2012, the block rewards were cut from 50 BTC to 25BTC. Just a month later, the Bitcoin price exploded by more than 7,976%.

The second halving took place in July 2016 with block rewards plummeting from 25 BTC to 12.5 BTC. Just over a year later, the token’s price surged by 2,902%. The last two halvings have resulted in an increase in Bitcoin value by reducing the number of BTC that enter circulation. Thus, the third halving is expected to have the same effect.

Nonetheless, some analysts think that this time around Bitcoin is heading into the halving without any significant bullish steam. They allege that Bitcoin has never acted this way.

Is This Bitcoin Plunge a Shakeout?

With the recent downturn in mining difficulty, it will not come as a surprise if Bitcoin is dumped. Any major drop in price would suggest that the weak miners are selling to reduce their losses. In turn, the selloff may result in the retail investors relinquishing their holdings.

If another bloodbath arises, it will be expected. There is always a shakeout before halving as explained by Rekt Capital. Traders keenly studied the price action of bitcoin before the first two halvings. Rekt Capital goes on to say that the weak hands are normally shaken out and lose out on future gains.

Current Miner Dropouts Should Reduce Selloff After the Halving

Getting rid of the inefficient miners will contribute to the long-term health of the Bitcoin network. The miners who manage to stay afloat in the coming months most probably will be those operating in areas with cheap power costs while running optimal mining rigs. Anyone who survives the imminent shakeout will probably survive the immediate impact of the halving.

Remember that the block rewards will shrink from 12.5 BTC to 6.25 BTC. This means that the miners’ income would reduce by 50%. Hence, just the most efficient miners will probably remain operational after the halving. But, if most weak miners drop out before the halving, just a few miners may capitulate after the May 2020 halving.

That would become long-term bullish for bitcoin because it will reduce the number of sellers after the halving. With a majority of the miners holding on to their tokens, Bitcoin may take off quickly after May 2020.

Tough Times Call for Unity

Reports emerged that German Bitcoin mining firm Northern Bitcoin has formed a merger agreement with US-based competitor Whinstone to jointly set up what is expected to be the biggest mining farm worldwide.

According to a November 18 press release published by Northern Bitcoin, Whinstone is currently building the aforementioned facility. This facility will have a capacity of one gigawatt on an area of at least 100 acres in Texas. The mining firm will supposedly become the biggest data center in North America.

The first construction phase is expected to conclude in Q1 2020. It will already have a capacity of 300 megawatts. Nonetheless, construction is expected to be completed in Q4 2020.

The first two clients that will take full advantage of this upcoming facility will expectedly be two publicly traded corporations. They will use a considerable portion of its capacity for Bitcoin mining. Additionally, after its completion, the data center will also enable the speed up of video rendering and artificial intelligence applications.

Notably, Northern Bitcoin is a stock-traded company that was founded in 2018 and it specializes in sustainable Bitcoin mining. The firm manages and operates a mining farm on renewable energy in Norway. The idea of placing the world’s biggest mining facility in the United States is quite interesting.

The investment is an interesting move considering that China has so far been at the forefront of the crypto mining industry and has many of the leading companies in the industry operating within its borders like Bitmain. As we published earlier, Bitmain launched a 50MW crypto mining facility in Texas amid an expansion drive.

Recent analysis reveals that low power costs in addition to access to cheap hardware make China a competitive destination for crypto mining operations in spite of the country’s legal environment. Will the bitcoin price drop further or are the bulls ready for takeover, only time will tell.

Author: Wanguba Muriuki

Wanguba Muriuki is a content crafter passionate about putting everything into writing. He is passionate about Blockchain and Traveling. He is also an experienced creative and technical writer. Everything and everyone has a story to tell. What better way to capture the real story than in words.

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