Understanding BTC Mining

Hey Folks! Jeff Bishop here.

The crypto winter of 2022 is now a distant memory, and I think we now have a major opportunity ahead of us.

Bitcoin price jumped 150% last year and, even after the recent pullback, is still up nearly 50% year-to-date.

With increased institutional adoption, increased utility, and a post-halving surge that has yet to materialize, the case for six-figure Bitcoin is stronger than ever, and I think we could see it this year.

Let’s dive in…

One major tailwind that propelled Bitcoin to its all-time high of $73,800 in March was the SEC approval of 11 spot Bitcoin ETFs in January.

Since their launch, these ETFs have seen some of the largest inflows of any ETFs in history, triggering a supply squeeze that has sent the price of BTC soaring…

As of April 20, these ETFs together had amassed more than 830,000 BTC, now valued at some $50 billion and representing over 4% of the total current BTC supply.

Aside from the demand pressure these ETFs exerted, they added a considerable sense of legitimacy to cryptocurrency more broadly, helping quell fears of impending government crackdowns.

Will the government really crush the value of multibillion-dollar ETFs run by the likes of BlackRock, Fidelity, and VanEck? I doubt it.

I expect these ETFs to provide steady buy pressure on BTC as investors continue to gain exposure to the cryptocurrency without having to take on the risks of owning it directly or having to sign up for an exchange.

The other big tailwind in BTC’s sails has been the halving event on April 19.

For those who don’t know, halvings are events that occur once every four years, resulting in the rewards for Bitcoin mining being cut in half.

I’ll have more to say on Bitcoin mining tomorrow, but for now, suffice it to say that halving the supply substantially reduces the supply of new bitcoins.

Historically, these events have been accompanied by major price jumps in Bitcoin both before and after the halvings.

The craziest jump was in the year after the first halving in 2012, when the price shot up 8,000%...

If that same percent increase occurred today, bitcoins would be worth $50 million each.

Of course, that would also raise the total market cap above the entire global economy, so let’s just say it’s not likely…

But after the 2016 halving, the price climbed from $650 to $2,500 — a 280% increase — within a year, and after the 2020 halving, the price soared from $8,570 to a whopping $56,760 — a 560% increase in less than a year.

This doesn’t include this year’s price jump, but you get the idea.

The lead-up to this year’s halving saw a similar price increase to previous ones, but the post-halving rally has yet to materialize…

There’s some question as to whether that means it was already priced in, but given that we’re only a month out from the halving, I think that speculation is premature.

Other big potential catalysts for Bitcoin going forward are the Fed’s impending (if the prediction markets are right) rate cuts, which typically drive risk assets like Bitcoin higher.

But even if inflation prints keep coming in hot and the Fed keeps rates steady, the idea of Bitcoin as a hedge against inflation may gain further traction.

Lastly, I should mention that if you haven’t been paying attention lately, you may have missed that Bitcoin has made considerable progress on the payment front, with total payments over the Lightning Network growing 1,200% over the last two years.

This new “layer” on the Bitcoin network enables faster transactions and dramatically reduces energy consumption.

If this new protocol continues gaining momentum — and there’s every reason to believe it will — we could see the public’s idea of Bitcoin evolve from it being not only a store of value but also an alternative payment method.

Right now, all of Bitcoin’s value propositions are stronger than ever, and it’s hard to see how a surge isn’t imminent, barring some black swan event.

That said, I personally think there are better moves to make at this point than buying Bitcoin itself…

I don’t own any actual cryptos right now, but that’s because I prefer to trade mining stocks. Like precious metals, mining stocks offer more leverage and liquidity options. 

While I do own physical gold, I prefer to trade the miners when I see a trend emerging in the gold sector.

Since many people hesitate to trade Bitcoin mining stocks because they don’t understand crypto mining, tomorrow I’ll send you a rundown of crypto mining 101 that I hope will clear up some misconceptions. 

So stay tuned to your inbox tomorrow.

To Your Success,

Jeff Bishop

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