Is it END of the bull run? | Hashpower Academy

Video Transcript:

hello there and welcome to another video from the hash power Academy my name is Jake scanland I’m the lead educator here and today’s question of the day is is it the end of the bull run now the Bull Run is a market phase in which price is going up that’s the the premise of uh an increase in momentum these sorts of phases have typically an increase in transaction fees on the blockchain side of things and the price shoots up has some form of distribution and shoots back down that’s what has historically happened when looking backwards but remember past results are not always a guarantee of what’s going to happen but what we can observe is the differences between say production and consumption and what I mean by this is well everyone sees price the financial sector they’re looking at price price price price Finance Finance finance and everyone seems to have this obsession with Bitcoin and its dollarized price now the problem there is that you may not have enough information or context as to the other half of the network which is to do with energy now if I was to draw a line to show approximately the price as shown here but also the network average production cost and it goes a bit like this there’s a China migration and continue now what you’ll notice is basically a bull market can be considered this massive increase in profitability for producing Bitcoin and then profitability declining and the next bll cycle massive surges and the comparison between a minor producing at say four5 $6,000 whilst earning $220,000 if they if you mine a Bitcoin and it costs you $4,000 to produce it $5,000 $66,000 depending on the efficiency of your machines and you’re earning $20,000 in this this period of time well the approximate bull market Peak was about eight times production at this point in time now this phase the the bull market Peak was actually about four to five times production and the differences between these two there’s some aspect of diminishing returns the chart is an examp exactly shown as to how perfect how uh difficulty and the increased hash rate dilutes the amount of Bitcoin per terahash per day and the electrical bill but basically the key takeaway here is a bull market can be more understood as a complete disconnect between the production cost of mining Bitcoin and the price of how much you’re you’re earning for producing that commodity and interestingly enough where is the bottom where is the bottom of the market what’s the lowest price it goes price typically gets very close to the production floor every single cycle for the reasons that miners will buy electricity and produce Bitcoin and sell some of it so they’re buying energy selling Bitcoin but if the price of Bitcoin drops below the the cost to produce you wouldn’t turn that machine on because if you were if you were producing Bitcoin with a cost of $4,000 but it would only earn you $33,000 worth of bitcoin well you’re going to be earning at a loss why would you keep that machine on you’d switch it off and some miners have the opportunity to sell that power that they’ve contracted from a utility provider they can sell that power back to the grid so if they have $4,000 worth of electricity that they can sell and buy uh $3,000 Bitcoin with that well you could effectively buy more Bitcoin by selling power than by mining it and what this does is it creates a dynamic between the price of Bitcoin and the production floor and so yeah every single cycle it drops to roughly 1X production so bull market Peaks are a multiplier of uh the amount of your $1 of electricity makes you $8 of Bitcoin and at the bottom of the bare Market mining is really unprofitable and it’s also a signifier of the best time to be buying so there’s there’s a very paradoxical nature to it that the best time to be mining Bitcoin um is the peak of the bll market but what happens at the peak of the bull market something might happen to Trend it back down and the absolute worst time to be mining in terms of profitability is when price is very close to produ uction the the prices of machines are cheaper there’s probably um miners in distress and selling and basically the reason I’ve explained all of this is because production costs from the Bitcoin mining sector will provide you more information about price instead of just all of this being completely disappeared and you’re doing technical analysis charting weird and wonderful lines um thinking what the price is going to do if you base something on mathematics and physics which is what a miners what are miners producing it at their electricity bill versus the amount of Bitcoin per kilowatt that they are earning that gives you a lot more information as to how low the price will go before a natural buyer steps in because if your price drops below your production cost miners will switch off and if they can sell the power they can buy back they could buy Bitcoin instead of uh mining it and selling it so it would be energy selling Bitcoin buying versus mining which is energy buying Bitcoin selling um there’ll be more video content on this uh in later videos but this is an overall gist of making sure people sort of observe that there is a lot more information to the price of Bitcoin than a single squiggly line going up and also production as a as a as an economic sector is this you’ve got everyone chasing Bitcoin with their dollars but miners are chasing Bitcoin with their electrons and you’ve got this cycle of well a energy producer anywhere on the planet has the ability to monetize that energy without connecting to a grid because Bitcoin mining is essentially a wireless network of monetizing energy they just deploy computers locally to connect to a global financial asset and coming back to the question of is it the end of the ball run I don’t think so at all because it’s not shown on this chart but the production cost right now for Bitcoin as a network average is about $4 $50,000 and the price is $80,000 which is barely a 1.4 multiplier versus the peaks of every bull market being 8X or 4X so I think at least a 2X 3x is healthy so I don’t really give price predictions but my guess would be 250,000 but this is not Financial advice and but we’re not just going to magically shoot up to 250,000 it’ll probably it’ll probably more be a uh volatile sideways price action and um shaking shaking people out um creating a lot of confusion uh smart money accumulating as much as they can and then they will let the price absolutely rip um and the clearest comparison I always do decision making with is observing what are the minor ucing at because everything to do with mining is associated to the most important metrics to observe hash rate going up creates a an increase in the difficulty adjustment which represents the total compute of the entire network and compute power is produced from electricity so you have an understanding from the difficulty adjustment as to how much energy is in the system and how much uh hash rate is being is being brought online and the other side of that is proof of work which is blocks of Bitcoin being produced and the amount of fees per block is in more information as to how much transaction velocity is happening on the network all of these things come into play but they are not shown in price price is pure clear-cut supply and demand everything to do with transaction fees wallets addresses uh the fee Market the amount of hash rate online the difficulty adjustment all of those are associated to the underlying fun fundamentals based in physics and maths and provable work stored in blocks online and all of that stuff is the onchain metrics and how you interpret those will give you a lot more information than the finance ear just staring at the price I hope this was interesting I hope you uh don’t worry yourselves too much as to the uh the ball Market bare Market just just manage your decision making on the difference between the price and the production floor as a network average I’ll add a link in the description actually to a website by Cambridge University in which they provide metrics on the Bitcoin Network and one of them that’s critical is to understand the average efficiency of Bitcoin mining hardware and later videos I’ll delve into how you can calculate the amount of Bitcoin per kilowatt as a way of measuring uh the profitability of Mining and compare that to say a 5 Cent electricity which could be considered a sort of standard average the public miners are more using cheaper electricity say 3 4 cents and more retail miners are going from 56 78 cents per kilowatt yeah hope you enjoy