May 20, 2020 / Business

Three Threats To Bitcoin Price

bitcoin

With the potential of Bitcoin, it is important to look not only at its perspective but also to assess the possible dangers. The crypto blogger Sunny Decree called three of them.Futures

Bitcoin futures are the first issue that a crypto enthusiast has identified. He draws parallels between the news that the trader Paul Tudor Jones, said he holds almost 2% of his funds in BTC. And the fact that after the news was disseminated by the media, there has been an increase in the activity of trading futures on the CME exchange.

The blogger is sure that other major stock market players drew attention to this message. They decided to diversify their investment portfolio with cryptocurrencies. But they do this not through the purchase of BTC, but through futures, which are in fact speculation on the Bitcoin price.

Why is that bad? Because investor funds from Wall Street do not flow to Bitcoin. They simply earn volatility without buying an asset.

The fact is that funds in the futures market do not increase Bitcoin’s market capitalization.

The futures market does not help the adoption of bitcoin. For institutions, bitcoin is not a means of payment or accumulation, it is just a risky asset that makes a profit.

It is CME futures, as we learned only in 2019, that was approved by the American authorities with the aim of piercing the Bitcoin bubble in December 2017. And they did it. And now the question is: can it be that the increase in activity in the regulated futures market will prevent the rise in the price of bitcoin in the spot? Indeed, many are guided by CME and just now most of them have chosen shorts.

Hashrate

It was not long ago that the third halving took place on the bitcoin network, and now the block reward is 6.25 BTC. This event led to the overload of the mempool and an increase in the average block production time to 12 minutes. Therefore, many are now experiencing inconvenience due to the long confirmation of transactions and curse at the growth of fees:

btc transaction

In his video, Sunny Decree points out that the hashrate after halving decreased by 30% from 136 to 95 EH/s. Here we will not agree with him, because in this range the hash rate fluctuated even before the halving, and as we can see the network capacity has grown.

Therefore, it’s impossible this hash drop does not need to be compared with Bitcoin Cash. Bitcoin miners withstood the blow of the halving.

The drop of hashrate is not a problem. However, Sunny Decree asked the very following question: what will happen to the network capacity if the Bitcoin price drop? If the optimistic forecast for Bitcoin with an output above $ 10,000 and the continuation of the uptrend does not work. The chances are very high. But if not and the price falls down, then the miners will definitely start to turn off and the hashrate will drop significantly.

Note that when the miners leave Bitcoin mining, they turn off the ASIC until better times. Thus, we will have a lot of idle equipment at 30%, 40% and even 50% of the current hashrate. The threat is that someone can use them to attack the Bitcoin blockchain. This is a problem exclusively for a particular exchange or seller, who will be left without coins due to the cancellation of the transaction through a 51% attack. In fact, this discredits the Bitcoin network and prevents the attraction of new supporters, in the sense of users.

Nodes

The problem that should really bother is the decrease in the number of bitcoin nodes. As Sunny Decree notes, their number has decreased by 20% over the past 90 days:

btc nodes

Recall that miners only collect transactions in blocks, but it is the nodes that are involved in checking and confirming them. But if the miner receives a reward for the block and commission as a reward for work, then the owners of the nodes spend their Internet and computer resources voluntarily, without receiving any reward for this.

Therefore, it is not surprising that gradually they decide to abandon support for the Bitcoin network because they are tired of storing blockchain data on their hard drive, the size of which is constantly increasing, for example.

And the problem is not that part of the old school skills the nodes, the trouble is that new people do not come in their place. While the current values ​​for the nodes are not critical. By the way, the most conscious adherents of Bitcoin, according to this map, live in the USA and Germany.

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