What is Bitcoin mining today?

The cryptocurrency ecosystem is a decentralized system that exists, functions, and is protected by special pieces of information. These fragments contain all the necessary data about the coins, their travel history, and the owner, and it is all recorded in a special blockchain. For each subsequent financial transaction, a “fresh” block is required, which will then join the general chain.

Creating new blocks is what crypto mining is all about. In fact, miners do not create coins, but form blocks for transactions for which they receive payment in coins, which is their reward.

The peculiarity of this process is that computing operations require very powerful equipment, and the entire system requires an extremely large network for its life and functioning. Each miner who joins the creation of blocks becomes part of the global hashrate of the currency ecosystem and supports its viability.

Is bitcoin mining still profitable?

The Internet space is full of expert opinions, unofficial studies, and critical articles about mining. The main question that most people are interested in is whether mining cryptocurrency is profitable. And the answer is yes, it is, but only if you take the right approach.

There are several reasons why dealing with bitcoin is profitable:

• Growth in demand and price. Bitcoin is already fully used at the level of the global commercial market, by funds and exchanges. Bitcoin halving helps to maintain its viability and high demand, volatility preserves the value of each coin, and the network is projected to peak around 2140;
• Technical progress. Systems and technologies are constantly improving, changing and adapting to new requirements of society and consumers. Cryptocurrencies are no exception to the rule. They are being modernized, methods and ways to work with them are being developed, and the technical potential of computers is growing. This allows mining to obtain modern tools, which is also becoming relevant and in demand;
• Global growth. The network is growing exponentially all the time, but its borders are still very far away. If we take the planned number of coins as a benchmark, 21 million are planned to be added to the system, and the 2024 halving will work when the number reaches only 840 thousand. So there is still enough space for everyone, and there is a need for it;
• States see prospects. At the legal and legislative level, cryptocurrencies are currently rather poorly regulated, but government agencies are constantly working on this issue. So, they see the rationality in this, and this is another indicator for users, miners, and businesses.

Of course, there are risks in any business. However, in terms of mining, the potential threats are much lower than in the same currency trading.

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Bitcoin’s unique characteristics as a decentralized, digital asset mean it does not conform to the traditional concept of market cap in the same way as stocks or other assets. This article explores why Bitcoin technically doesn’t have a market cap in the traditional sense, its limitations, and why understanding this difference is important.

What Is Market Cap in Traditional Finance?

In traditional finance, market cap represents the total value of a publicly traded company’s equity. It is calculated as:

Market Cap = Share Price × Total Number of Outstanding Shares

This value helps investors understand the relative size of a company and compare it to others in the same industry or sector. Importantly, it reflects investor confidence, the company’s performance, and future growth potential.

Bitcoin’s “Market Cap” and Its Calculation

In the cryptocurrency world, market cap is often calculated using a similar formula:

Crypto Market Cap = Price of One Coin × Circulating Supply

For Bitcoin, the circulating supply is the total number of coins mined and currently available (approximately 19.5 million BTC as of 2024). Using this formula, Bitcoin’s market cap is regularly touted in the trillions of dollars, cementing its place as the most valuable cryptocurrency.

Why Bitcoin Does Not Truly Have a Market Cap

1. Lack of Centralized Equity
   Unlike traditional companies, Bitcoin is not a business entity with equity ownership. It is a decentralized protocol, not a corporation, and therefore does not issue shares or represent ownership in any organization. The “market cap” calculation for Bitcoin is more of an approximation of its total network value rather than a true measure of ownership or control.
2. Illiquidity and Volatility
   Bitcoin’s price is highly volatile, often influenced by market sentiment, speculation, and external factors. The calculated market cap assumes that all coins could be sold at the current price, which is unrealistic in a market with limited liquidity. A large sell-off would drastically lower the price, making the market cap a theoretical number rather than a practical one.
3. Lost Coins and Inaccessible Supply
   A significant portion of Bitcoin’s circulating supply is permanently lost due to forgotten private keys, abandoned wallets, or deceased holders. Estimates suggest that millions of BTC are effectively out of circulation. Despite this, these lost coins are still included in the market cap calculation, inflating the perceived value of the Bitcoin network.
4. No Intrinsic Link Between Price and Supply
   In traditional markets, a company’s stock price reflects investor confidence in its fundamentals, such as revenue and profitability. Bitcoin’s price, on the other hand, is determined purely by supply and demand dynamics, with no underlying revenue or performance indicators. As such, its “market cap” lacks the same economic grounding as that of a stock.
5. Speculative Nature
   Bitcoin’s value is largely driven by speculation and its perceived utility as a store of value or hedge against inflation. Unlike stocks, which represent claims on a company’s assets or future cash flows, Bitcoin’s valuation is tied to its decentralized network and the trust of its users. This makes its market cap a representation of speculative sentiment rather than intrinsic value.

What Does Bitcoin’s “Market Cap” Really Represent?

1. Network Value
   Bitcoin’s market cap can be seen as a rough approximation of the perceived value of its network. It reflects the collective belief in Bitcoin’s utility, scarcity, and future potential.
2. Comparative Metric
   Within the cryptocurrency space, market cap is often used as a comparative metric to evaluate the size and significance of different projects. Bitcoin’s market cap establishes it as the dominant player in the market.
3. Public Perception
   A high market cap enhances Bitcoin’s perception as a credible and valuable asset, attracting more institutional and retail investors. However, this number should not be mistaken for a true representation of liquidity or realizable value.

The Risks of Misinterpreting Bitcoin’s Market Cap

1. Overestimated Value
   Many investors may assume Bitcoin’s market cap represents the total value that could be realized if all BTC were sold. In reality, the market would crash long before reaching this theoretical figure due to its illiquidity.
2. Neglecting Lost Coins
   Including lost or inaccessible coins in the circulating supply inflates the market cap and distorts the actual value of the Bitcoin network.
3. Ignoring Volatility
   Bitcoin’s price volatility means its market cap can change drastically within hours, making it a less stable metric compared to traditional assets.

Bitcoin’s market cap, while useful for comparative purposes, is not a traditional measure of value. Unlike stocks, Bitcoin is a decentralized, non-equity asset that operates independently of corporate structures. Its market cap is better understood as an approximation of its perceived network value rather than a definitive indicator of its worth.

Investors and analysts should approach Bitcoin’s market cap critically, recognizing its limitations and the unique characteristics of the cryptocurrency market. By understanding these nuances, they can make more informed decisions and better navigate the complexities of this evolving asset class.

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With Bitcoin ETFs, investors can add Bitcoin (BTC) to their portfolios without actually owning the underlying asset and without having to worry about the safe keeping of their investment in the form of digital assets. However, this also means that Bitcoin ETF holders do not own BTC per se.

If you want to directly own BTC, you can use a crypto wallet such as Trust Wallet, which allows you to easily and securely buy and store Bitcoin. Since Trust Wallet is not a custodial wallet, you fully own and control the BTC you buy and can use your coins to make payments.

However, if you are interested in adding a Bitcoin ETF to your portfolio, read on. In this article, you’ll learn all about what Bitcoin ETFs are, how they work, see some examples, and more.

The basics

An ETF is an investment vehicle that tracks the performance of an underlying asset, such as a commodity, stock, bond, index, derivative, or basket of assets.

ETFs are traded on an exchange, just like stocks. Hence the name. In all respects, an ETF is similar to a mutual fund, as they are both pooled and managed by their issuers. But they differ in structure and trading method.

The global ETF industry is currently worth $10 trillion and is expected to reach $18 trillion by 2026.

Typically, ETFs are created by asset management companies or other financial institutions that continue to manage the asset. They pool investors’ funds to invest in a diversified portfolio of assets. Investors can buy and sell ETF shares at any time during the trading session. Mutual funds, on the other hand, are usually traded at the end of the market day, when the price is set.

With ETFs, investors have access to a wide range of assets, which allows them to diversify their portfolio. They also provide transparency, as information about the assets in them is usually disclosed on a daily basis. In addition, ETFs tend to have lower expense ratios compared to mutual funds.

What is a Bitcoin ETF?

A Bitcoin ETF is an exchange-traded fund that consists of Bitcoin or assets tied to the price of Bitcoin.

Unlike Bitcoin, which is traded on cryptocurrency exchanges, Bitcoin ETFs are traded on securities exchanges, just like stocks. As a result, investors do not have to go through the process of setting up a digital wallet and dealing with cryptocurrency exchanges.

Bitcoin ETFs are a more familiar financial instrument for traditional investors who prefer to invest in Bitcoin without worrying about the risks and complexities of owning and storing digital currency. For example, bitcoins are stored in a wallet, and if an investor loses access to the wallet, they lose their bitcoins. With Bitcoin ETFs, there is no need to worry about this.

Today, in the US, Bitcoin ETFs do not hold Bitcoin themselves. Instead, they hold Bitcoin futures as an underlying asset.

The introduction of Bitcoin ETFs is seen by many as a significant development in the cryptocurrency industry. It provides a regulated and affordable way to invest in Bitcoin. This can attract institutional and retail investors who prefer more traditional investment instruments. Bitcoin ETFs could lead to the mass adoption of Bitcoin as an investment asset.

Bitcoin ETFs available on the market

Currently, the US Securities and Exchange Commission (SEC) has approved several Bitcoin ETFs for trading in the United States. However, at the time of writing, the ETFs available in the US are not actually backed by Bitcoin, but instead track its price. Nevertheless, Bitcoin ETFs do exist outside the United States. Below, we will take a look at some of the most actively traded Bitcoin ETFs and provide some information about them.

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In this article, we’ll explore the relationship between Bitcoin and global crises, its potential as a hedge, and the risks it carries in turbulent times.

Bitcoin as a Safe Haven: The Case for Stability

1. Decentralization and Sovereignty
   Bitcoin operates independently of governments and central banks, making it immune to inflationary monetary policies. In times of economic instability, this decentralization appeals to those seeking an alternative to fiat currencies that may be devalued.
2. Scarcity and “Digital Gold” Narrative
   With a capped supply of 21 million coins, Bitcoin mirrors gold’s scarcity, which has historically been a cornerstone of its safe-haven status. During crises, investors often turn to assets with limited supply to protect their wealth from depreciation.
3. Increasing Institutional Adoption
   Bitcoin’s growing adoption by institutional investors adds a layer of perceived legitimacy and stability. Companies like MicroStrategy and Tesla holding Bitcoin on their balance sheets indicate confidence in its long-term value.
4. Borderless and Easily Transferable
   In times of geopolitical crises, Bitcoin’s borderless nature makes it an attractive option for transferring and securing wealth, especially in regions with capital controls or failing banking systems.

Bitcoin as a Risky Asset: The Case for Caution

1. High Volatility
   Bitcoin’s price is notoriously volatile, often experiencing significant swings within days or even hours. During global crises, this volatility can amplify, making it a risky choice for those seeking stability.
2. Correlation with Risk Assets
   While Bitcoin has been compared to gold, its price movements often correlate with traditional risk assets like stocks. For instance, during the COVID-19 market crash in March 2020, Bitcoin’s price plummeted alongside equity markets, challenging its safe-haven narrative.
3. Regulatory Uncertainty
   In times of crisis, governments may introduce stricter regulations on cryptocurrencies, viewing them as a threat to traditional financial systems. This regulatory uncertainty can deter investment and add downward pressure to Bitcoin’s price.
4. Liquidity Risks
   Although Bitcoin markets have matured significantly, they are still relatively illiquid compared to traditional assets. In times of panic, this can lead to sharp price drops as traders rush to liquidate positions.

Historical Performance: How Bitcoin Has Reacted to Crises

1. 2008 Financial Crisis (Bitcoin’s Birth)
   Bitcoin was created in response to the 2008 global financial crisis. Its genesis block famously includes a reference to a newspaper headline about bank bailouts, emphasizing its purpose as an alternative to traditional financial systems.
2. COVID-19 Pandemic (2020)
   Initially, Bitcoin fell sharply during the March 2020 market crash, dropping by nearly 50%. However, as central banks introduced unprecedented monetary stimulus, Bitcoin rebounded strongly, reaching an all-time high by the end of 2020.
3. Geopolitical Tensions (2022)
   During the Russia-Ukraine conflict, Bitcoin saw increased adoption in affected regions. Ukrainians used Bitcoin to secure wealth amid currency devaluation, while Russians turned to it to bypass sanctions, highlighting its utility during geopolitical crises.

Bitcoin’s Role in a Future Global Crisis

1. Inflation Hedge Potential
   With inflation rates rising globally, Bitcoin’s capped supply and decentralized nature could make it an appealing hedge against currency devaluation.
2. Store of Value vs. Medium of Exchange
   As Bitcoin’s adoption grows, it may transition further into a store of value akin to gold. However, its use as a medium of exchange in crises will depend on continued improvements in scalability and usability.
3. Institutional Behavior
   The response of institutional investors during a future crisis will be pivotal. If institutions continue to treat Bitcoin as a long-term asset, it may reinforce its safe-haven status.
4. Technological Advancements
   Ongoing developments, such as the Lightning Network, could enhance Bitcoin’s appeal by making transactions faster and more cost-effective, increasing its utility during crises.

Conclusion: A Dual Identity

Bitcoin’s role during a global crisis remains a topic of debate. Its decentralization, scarcity, and growing adoption suggest it has the potential to act as a safe haven. However, its volatility, regulatory risks, and correlation with traditional markets underscore its challenges in this role.

For investors and analysts, Bitcoin represents a dual identity: a hedge against traditional financial systems and a speculative asset with high-risk potential. Its behavior in future crises will depend on market maturity, regulatory developments, and global economic conditions.

As the world braces for the next inevitable crisis, Bitcoin will undoubtedly remain a key part of the conversation, evolving alongside the dynamics of global finance.

The post Global Crisis and Bitcoin: A Safe Haven or a Risky Asset? appeared first on Coinometrics.

Why Use Surveys in Cryptocurrency Analysis?

1. Understand Market Sentiment
   The crypto market is heavily influenced by investor sentiment. Surveys help capture the mood of the market, from bullish optimism to bearish caution. By understanding sentiment, analysts can predict potential market movements and shifts in demand for specific assets.
2. Gauge Adoption Trends
   Surveys are essential for tracking how cryptocurrencies and blockchain technologies are being adopted across various industries. For example, they can reveal the growing use of Bitcoin as a payment method or the rise of decentralized finance (DeFi) platforms.
3. Spot Emerging Opportunities
   By gathering feedback from developers, investors, and consumers, surveys can highlight upcoming trends, such as new blockchain use cases or innovations in non-fungible tokens (NFTs).
4. Strengthen Community Engagement
   Engaging your audience through surveys not only provides valuable data but also fosters a sense of community. It shows that you value their opinions, building trust and loyalty within your readership or user base.

Types of Surveys for Cryptocurrency Insights

1. Market Sentiment Surveys
   • Goal: Measure confidence in specific cryptocurrencies or market conditions.
   • Example: “How do you feel about Bitcoin’s price trajectory in the next 6 months?”
2. Adoption and Usage Surveys
   • Goal: Assess how and where blockchain technologies are being used.
   • Example: “Have you used a DeFi platform in the last year? If yes, which one?”
3. Investor Behavior Surveys
   • Goal: Understand investment strategies and decision-making processes.
   • Example: “What percentage of your portfolio is allocated to cryptocurrencies?”
4. Technology and Development Surveys
   • Goal: Identify challenges and opportunities in blockchain development.
   • Example: “Which blockchain network do you think offers the best scalability?”
5. Regulatory Impact Surveys
   • Goal: Explore perceptions of government regulations on the crypto market.
   • Example: “How do you think upcoming regulations will impact stablecoins?”

Best Practices for Conducting Crypto Surveys

1. Define Clear Objectives
   Know what you want to achieve with your survey. Are you looking to gauge sentiment, track adoption, or explore specific technologies? Clear goals will help you design effective questions.
2. Keep It Concise
   Cryptocurrency enthusiasts often have limited time. Keep your surveys short and focused to increase participation rates.
3. Target the Right Audience
   Ensure your survey reaches individuals actively engaged in the crypto space, such as investors, developers, or blockchain users. Use platforms like Telegram, Twitter, or Discord for distribution.
4. Use Incentives Wisely
   Offering rewards, such as small cryptocurrency tokens or access to premium content, can boost participation. Ensure incentives align with your audience’s interests.
5. Leverage Technology
   Use tools like Google Forms, Typeform, or blockchain-based survey platforms to create and distribute surveys efficiently. Blockchain-powered surveys can also ensure transparency and incentivize participation.

Case Studies: How Surveys Have Shaped the Crypto Industry

1. The 2020 Global Crypto Adoption Survey (Chainalysis)
   This survey revealed key adoption trends, highlighting how emerging markets were leading in cryptocurrency usage. The findings helped shape discussions on financial inclusion and blockchain accessibility.
2. DeFi User Surveys (Dune Analytics)
   Regular surveys from DeFi platforms have provided insights into user behavior, enabling platforms to improve their offerings and attract more participants.
3. Regulatory Perception Studies (CoinDesk)
   Surveys exploring attitudes toward crypto regulations have sparked critical debates about the future of decentralized systems and their interaction with traditional finance.

Surveys are a cornerstone of cryptocurrency analysis, offering unique insights into market sentiment, adoption trends, and emerging opportunities. By conducting well-designed surveys, crypto analysts and enthusiasts can uncover valuable data that drives smarter decisions and deeper understanding.

Whether you’re a blogger, investor, or blockchain project leader, incorporating surveys into your strategy is a must. They not only inform but also strengthen your connection with the ever-evolving crypto community.

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Understanding Bitcoin Halving

Bitcoin operates on a deflationary model, with a capped supply of 21 million coins. Halving reduces the issuance rate of new Bitcoin, making it scarcer over time. Currently, miners earn 6.25 BTC per block. After the 2024 halving, this reward will drop to 3.125 BTC. Historically, halvings have led to significant market reactions, influencing both price and miner behavior.

Historical Context: Previous Halvings

1. 2012 Halving
   After the first halving, Bitcoin’s price surged from around $12 to over $1,000 within a year. The reduced supply, coupled with growing demand, triggered this dramatic increase.
2. 2016 Halving
   Bitcoin’s price rose steadily after the 2016 halving, climbing from approximately $650 to nearly $20,000 by the end of 2017.
3. 2020 Halving
   Following the most recent halving, Bitcoin experienced another bullish run, reaching an all-time high of nearly $69,000 in late 2021.

These patterns highlight a trend of increased market activity and price appreciation post-halving, though there are no guarantees that history will repeat itself.

Potential Market Impacts of the 2024 Halving

1. Supply Shock
   With block rewards cut in half, daily Bitcoin issuance will decrease from 900 BTC to 450 BTC. This scarcity could lead to upward price pressure, assuming demand remains steady or increases.
2. Increased Demand
   Halvings often attract media attention and heightened interest from institutional and retail investors. As awareness grows, demand for Bitcoin could rise, further driving up prices.
3. Miner Economics
   Reduced rewards may squeeze miners, particularly those operating with thin profit margins. Inefficient miners might exit the network, potentially reducing Bitcoin’s hash rate temporarily. However, larger and more efficient mining operations could fill the gap, stabilizing the network.
4. Market Speculation
   Leading up to the halving, speculative buying often pushes prices higher. Post-halving, the market may experience increased volatility as traders react to shifting supply and demand dynamics.
5. Macroeconomic Influences
   External factors, such as global monetary policies and economic conditions, will also play a role. For example, if inflation concerns persist, Bitcoin’s narrative as “digital gold” could strengthen, amplifying its appeal.

Risks and Uncertainties

While historical trends suggest a bullish outlook, there are risks to consider:

• Regulatory Challenges: Increasing scrutiny from governments could dampen market enthusiasm.
• Macro Conditions: If global markets face significant downturns, investor appetite for riskier assets like Bitcoin may diminish.
• Market Maturity: As Bitcoin matures, its price reactions to halvings might become less pronounced.

The 2024 Bitcoin halving is poised to be a pivotal event for the cryptocurrency market. While history indicates a potential for price appreciation, external factors and market maturity could influence outcomes. Investors and enthusiasts should approach the event with a balanced perspective, staying informed and managing risks accordingly.

Whether history repeats itself or we see a new market dynamic unfold, one thing is certain: the halving will be a major talking point in the crypto world throughout 2024.

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