After the collapse of bitcoin

Bitcoin has the opportunity to hold up again?

Author: Wang Shen JIC investment observation original article

The second half of this year, bitcoin has fluctuated between $6000-8000, but from 11 month 14 day, bitcoin prices began to collapse, fell from $6500 a day, 25 fell below $4000, and fell below $3500.

With the fall of the encrypted currency’s leading bit bitcoin, other mainstream digital currencies have fallen. The top ten digital currency mostly showed double-digit decline. The data shows that the current global market value of encrypted currencies is $82 billion, down 75% compared with the highest value of last year in December.

So, with the price collapse again, will bitcoin have a chance to rise again?

“With history as a mirror, we can learn to be in place.”

There have been three violent tumbling in the history of bitcoin, and every time the investor has been on the car, it has been thrilled.

Bitcoin’s first rise and fall, 40 times higher in the 2 months since April 2011, fell 93% in the second half of the year, 93% in the second half of the year; a second surge, a 88 fold rise in 11 months and a 85% fall in the next year; the bitcoin is now in the third boom and tumble pattern, and is up 24 times in 2017. It is now down from the highest price of 20 thousand US dollars to $4000, when the bottom is still unknown.

From historical experience, bitcoin can rise dozens of times a time, but it falls after each boom, and will also be at the bottom for 1-2 years, and eventually it will be innovative in the next cycle.

At present, bitcoin has fallen from the highest point of history by 80%. Historical experience, the fall time has been close to a year, the price is only the remaining 20% of the highest price, but the future may still fall.

If the final fall is 90% of the highest price, bitcoin will fall about $50% to $2000 from the current price, but the process may be longer. The bitcoin is expected to wander at the bottom for 1-2 years and gradually seek a price balance.

The bitcoin prices plummeted, is the result of joint efforts of various factors.

The last two weeks of bitcoin crash was triggered by BCH (bitcoin cash) branch. BCH is the fourth largest digital currency, the miner giant, which controls a lot of bitcoin power, is split from the bitcoin original chain in August 2017 (it can be understood as a copy of a “Shanzhai” bitcoin.

Recently, the Craig Steven Wright (CSW), which controls BCH’s large amount of power, wants to split BCH again. The CSW camp and the bit continental camp began to fight for the dominance of BCH since November 16th. The duel was also seen as a duel between CSW and Wu Jihan, the founder of the bit continent, and CSW, a self called “Zhong Ben cong”, was dubbed “Macau bun”.

In order to win the battle, Macau and Wu chill use their own financial resources to switch many of the forces originally used to dig BTC (bitcoins) to BCH, which directly leads to a reduction in the overall force of the BTC. Two times a year, the hard split BCH will eventually lead to the gradual splitting of the community by the large miners, which may have one or no survival.

Why does it lead to a drop in bitcoin? It is because of the transfer of power, which weakens the bitcoin security model, and also puts bitcoin in the center of the situation, which makes the bitcoin believer contend, causing a large number of bitcoins to be sold.

The second direct cause of the fall is the strengthening of the US regulation of encrypted digital currencies. On the 20 day of this month, the three Department of the SEC (the three Department of the SFC), the company finance department, the investment management department and the market trade department, jointly issued a statement on the issuance and trading of digital assets securities, and proposed the functional supervision of digital assets.

At the same time, SEC also announced the first civil penalty decision on ICO. In Europe, Benoit Coeure, the executive director of the ECB, said in his speech that bitcoin is a combination of “bubble, Ponzi scheme and environmental disaster”, and is the evil product of the financial crisis.

There are two other reasons for the recent decline: first, a large number of block chain projects have a serious bubble (more than 90% of the block chain projects will die out in the next year). In the case of unsound infrastructure of the block chain, practitioners continue to raise the market expectations to unrealistic heights, and eventually encounter real shocks, resulting in constant loss of market confidence.

The two is that the bitcoin market is the capital market, and the volume is relatively small, and the market value of the global digital currency is not as good as the size of an Internet listed giant.

As the collective plunge of digital money, the mining machine also suffered a “mine” as the price of the coin fell sharply. It has been reported that a number of small small bitcoin mines located in Xinjiang and Inner Mongolia are selected to resell the mine.

After the mining machine is abandoned, such as hills in the yard, a year ago the price of up to twenty-one thousand sets of mining machines, second-hand transfer price is only 1000 yuan, even in accordance with the price of scrap iron is called to sell.

The bitcoin slumped and knocked out a considerable number of mining machines to dig out the cash cost (electricity), causing a large number of miners to stop.

According to website statistics, in October 4, 2018, bitcoin total network computing power reached the highest, about 74.54EH/s. In November 25th, the total computing power of bitcoin has been reduced to 42.01EH/s and reduced by 43% by 32EH/s. According to this year’s most popular ant miner S9 calculation force of 13.5T calculation, equal to the direct closure of 2 million 370 thousand S9 miners.

With the fading of the digital currency mining tide, the market, mining machine manufacturers and related technology enterprises are inevitably affected.

According to the Hongkong stock exchange website in November 15th, the IPO application, the second largest producer of the coal mining machine in China, has failed after 6 months of submission, and the Hong Kong exchange has not applied for the listing of the listings. This means that the IPO is afraid of “cold” in the year.

In addition, the famous chip maker, Ying Wei Da, is also affected by the depression of the mining industry. On Friday, the stock price fell 19%, and the market value was shrunk by $23 billion.

In the short term, a large number of mining machines can help to reduce the difficulty of mining, and gradually stabilize the price of bitcoin.

The biggest problem in bitcoin is that there is only transaction value now, so its price fluctuation depends on the flow of money, or it depends on people’s confidence. In addition, a large number of bitcoins are in the hands of a small number of people, so the price of bitcoin is easily manipulated, which also causes the volatility of bitcoin.

But in the long run, the value of bitcoin lies in the application of the block chain to the ground. Bitcoin is the first project of block chain application, which has the highest popularity and has the significance of the industry wind vane in the block chain industry.

At present, the block chain industry should accurately excavate the pain points, do a good job of landing application, realize the obvious reduction of the cost and increase the efficiency, can be a new generation of information infrastructure, bitcoin only in this process will the Phoenix Nirvana – explore its use value.

However, this process will take a long time, and many research institutions expect that the commercialization of the block chain will take at least 10 years.

People who want to cut the leek with a block chain can remember the Chiang dynasty that was defeated by the “bitcoin”.

Wang Shen, the author of this article, works for the China investment and Investment Research Institute. The article is an independent view of the author and does not represent the position of JIC investment.

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