Bitcoin’s recent price drop has led to speculation about whether or not it has reached its bottom. While some analysts on Crypto Twitter are confident that the bottom has been reached, the price of Bitcoin is still in a downtrend and traders are buying every dip. To gain more clarity on the situation, Cointelegraph spoke with Rich Ferolo of Blockware Solutions and Will Szamosszegi of Sazmining Inc. about the condition of Bitcoin miners and how it might impact market sentiment.
When asked about whether or not Bitcoin has hit its bottom, Szamosszegi recommended a dollar-cost-averaging strategy, as Bitcoin has experienced larger drawdowns in the past and has always made gains over any four-year period in its history.
Currently, Bitcoin is trading below the realized price and below miners’ cost of production. On-chain analysts typically see these metrics hitting extreme lows as a generational buying opportunity. However, Ferolo explained that the breakeven price for older machines is much higher than the current price of Bitcoin, and only newer, more efficient machines can still be profitable.
One factor to consider is the declining value of machines, which affects the overall cost of mining. Ferolo emphasized that the relationship between the price of Bitcoin and mining machines is symbiotic, and the value of machines is adjusted as the price of Bitcoin goes up.
When asked about the state of the mining industry, Ferolo agreed that there is a severe lack of infrastructure in the space, which leads to a lot of capitulation, insolvency, and excess machines. He also mentioned that big players are putting a pause on funding for miners, which creates an opportunity for new players to enter the space.
Szamosszegi added that historically, the hashrate of Bitcoin declines following a price decline, and newer miners typically wash out while the network strengthens. He expects mining to become more competitive in the next six months, with bigger players consolidating and buying miners at a discount.
In terms of when it’s a good time to start mining, Ferolo explained that setting up infrastructure at scale requires a significant investment, and smaller investments may not be worth it. He recommended diversifying investments between machines and spot Bitcoin, and considering hosting options for smaller investments.
When asked about the impact of Bitcoin’s price dropping below its all-time high for the first time, Szamosszegi stated that the fundamentals of Bitcoin remain unchanged and he still expects it to evolve into a global reserve asset. Ferolo added that the recent bad press and exposure of the crypto industry may lead to more bad press, but for those who believe in Bitcoin, it’s an opportune time to buy and invest in the space.
Finally, when discussing the upcoming reward halving, Ferolo mentioned that halving events tend to induce miner capitulation, but he’s surprised that the hash rate hasn’t fallen further. Szamosszegi highlighted that miners will need to reduce their costs to remain profitable, and the halving washes out inefficiencies in the mining industry.
Overall, while the price of Bitcoin may still be in a downtrend, the condition of miners and the mining industry suggests that there are opportunities for those willing to invest in the space.