The success of Bitcoin largely depends on the incentives given to miners. Every time a transaction is signed and confirmed, a hash is generated.h
Hash is like sealing wax on envelopes. It’s like a postmark. It is proof that your funds have been transferred safely and that you must pay the one who signs the confirmation, the miner. And the miners get paid in bitcoin.
But the costs are denominated in dollars. So they must sell from time to time to cover costs, to pay suppliers and investors. So far, surprisingly, they’ve held up. But they have given up. And the Hash Ribbon has given a sell signal.
Last year they capitulated to the restrictions in China and that event was recorded in higher prices. The expectations of the miners were bullish, they kept mining. But they gave up a few hours ago. Why?
Inflation affects the cost of energy production. It causes a very negative effect on the price of bitcoin, selling pressure.
There is a lot of competition. There are many miners competing and the rewards are reduced by halving.
Interest rates affect the investment side because we see more accessible rewards without investing in a technology so dependent on more unpredictable parameters (depreciation of machines, cost of electricity, competition, etc.).
We still see opportunities to sell and buy back where liquidity is concentrated the most, at the 200-period moving average on a weekly basis. And in the environment of 22-23K repurchases. Or go back to mining because prices are believed to be “low”. They may also wait for the trend change, let’s see where it would mark according to the EMA Ribbon.
In 2018 we saw a similar drop and one last upward move. Maybe it’s time to wait for that last push and be ready to buy again.
Bitcoin’s success is highly dependent on the incentives given to the miners.