Editor's Note: This article comes fromTalk about Xia Kanshi (ID: huaxiakiss), Author: Hua Xia, published by Odaily with authorization.
Talk about Xia Kanshi (ID: huaxiakiss
Talk about Xia Kanshi (ID: huaxiakiss
), Author: Hua Xia, published by Odaily with authorization.
When a crisis strikes, no one is innocent.
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Learn from history and know its harm
In the second half of 2007, after the outbreak of the subprime housing credit crisis in the United States, investors began to lose confidence in the value of mortgage securities, which triggered a liquidity crisis and led to the outbreak of the financial crisis. By 2008, the financial crisis began to spiral out of control and resulted in the collapse or takeover of several fairly large financial institutions. With the further development of the financial crisis, it evolved into a global real economic crisis.
Subprime mortgage lenders have relatively poor credit status, or lack of sufficient income proof, or have other liabilities. Therefore, it is easy to fail to repay the mortgage or default. However, when the credit environment is loose or housing prices are rising, the lending institution cannot collect the loan due to the default of the lender. They can simply take back the mortgaged house and sell it again. Get profitable.
However, when the credit environment changes, especially when house prices fall, it will be difficult for lending institutions to take back the house and sell it again. Either the house is difficult to sell, or the house price is sold too low, resulting in losses. When such things happen frequently, intensively, or on a large scale, a crisis arises. The truth is that the worst-case scenario did happen, leading to a tragic liquidity crisis.
Blindly optimistic about the future, and the collective habitual thinking about the eternal rise of US housing prices, it is common for everyone to increase leverage to participate in real estate speculation and speculation. This is regarded as a "smart move with vision."
This is a historical lesson that success is also leveraged and failure is also leveraged.
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no one can stay out of it
The expectation of halving the market has always been one of the few periodic landmark events in this industry. The past two halvings have ushered in the so-called "halving market" with considerable gains. Without soaking in this circle, it is hard to imagine what the word "halving" means to practitioners.
Throughout the past 2019, the people and funds directly and indirectly involved in the "halving" are conservatively estimated to have operated 100,000 people and 50 billion funds. The data may not be so accurate, but there must be a lot. This point can be seen only from the most mysterious and low-key circle in the mining industry. In the past year, the mining circle alone has invested more than 20 billion funds to meet the halving, and new and old miners have increased their computing power to operate at full capacity. Not only that, in order to make full use of capital efficiency, it is only a routine operation to use the mined BTC for off-site mortgage loans, and buy machines with the obtained legal currency to join the halving army. An unprecedented gamble on crypto assets has been in full swing this past winter.
The mining circle is considered to be the cornerstone of the stable development of the encryption industry in the past 11 years. The continuous investment in computing power equipment and R&D investment has made the computing power of the entire network based on BTC develop from very few at the beginning to 140EH/s at its peak (March 4, 2020), and this data was only 50EH/s at the beginning of 2019. The skyrocketing computing power, combined with the halving of block rewards every four years, makes the mining cost of BTC increase exponentially, and the mining cost is the minting cost of new coins, which is considered to be the final support for the price of BTC.
The army of miners has played a vital role in the growth of BTC. While enjoying the largest wealth effect in the industry, it seems that you should also bear the biggest risk in this industry.
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Miners, it's hard now!
This round of industry avalanche brought together superimposed factors from multiple black swans around the world. The single-day drop exceeded almost everyone’s past industry perception. The price fell from $7,969 to a minimum of $3,850, and the 24-hour amplitude reached 51.71%. Affected by this, except for a few mining machines such as S17, S19, M30, and M31, which are still profitable, most of the other mining machines have fallen below the shutdown price.
Many people may think, since the price in the secondary market is already lower than the cost of mining, why not stop mining and buy directly from the secondary market. A very important issue is overlooked here. Most miners are really not people who hold a large amount of legal currency. The legal currency obtained from the mortgage loan is directly invested in the purchase of equipment, and the concept of hoarding currency is particularly prevalent in the mining circle, especially during periods of low prices. Without legal currency, what to buy in the secondary market?
In other words, the group of miners is the largest bull in the industry at a certain stage (a period of low prices). The leverage of miners is mainly off-site leverage, which is different from on-site contract leverage, and it will return to zero after liquidation. Once the miner's leverage triggers the mortgage red line, the mortgaged spot BTC will enter the secondary market and be sold in large quantities, and the rest will be miners. At this time, the mining machines that have survived may be the only chance for miners to turn around.
As I write this, I feel very complicated about the miners who stick to it. Perhaps, the largest reshuffle in the mining circle must be completed this time, and bankruptcy and liquidation may be unavoidable.
In addition to the miners, the trading participants in the venue, the accumulated multi-order leverage and Defi have also become powerful adders. Excessive expectations for halving and excessive trust in past experience have become a veil for everyone to run blindfolded.
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Destined to be a game of who can run faster
According to the past script, about 1-2 months before the halving time, the price will reach a stage high. After the halving, the price will pull back to complete the consolidation and build a bottom, and then climb slowly, gradually ushering in a big bull market.
And this avalanche is actually 2 months away from the official halving time. What may surprise us is that although the halving price has risen this time, the increase is far from reaching the "wanted" expectation, so we are still looking forward to and waiting.
Here, we may have overlooked one of the biggest problems, that is, with the increase in the mined stock of BTC, the proportion of unmined coins is only 13.11%. Converted to the next two years, the proportion will be even smaller. The ratio has become less and less able to determine the supply and demand relationship in the market. In fact, the pricing power of BTC has been transferred from mining costs to the secondary market. In other words, buying demand determines the future price direction.
As far as the secondary market is concerned, with the increase of various encrypted asset derivatives (futures, Defi, ETF, etc.), the pricing power has no choice but to come from derivatives such as contracts, and the weight of spot transactions will continue to shrink. This phenomenon will become more apparent in the future.
Regardless of the form in which various derivatives appear, they are ultimately a leveraged game in essence. Leverage will constitute the largest formation factor of the future encrypted asset cycle. Success is also leveraged, and failure is also leveraged.
Games that are reduced to funds and speculative games may not be what most crypto enthusiasts want to see. To break this fate, the only way is to continuously expand the application scenarios of BTC on the actual demand side. Encryption practitioners have a long way to go!
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about the future
