Will the price of bitcoin double or crash during the upcoming halving next year? And how will the mining industry adapt to their revenue stream being cut in half over night? See what professional miners from around the world have to say on the matter.
The Bitcoin.com team has recently talked with ten prominent people from the crypto mining industry about the upcoming halving at the World Digital Mining Summit 2019 in Frankfurt. Some think that it might cause miners’ revenues to crash, others think prices will quickly rise to compensate for the diminished rewards, all agree it will be a pivotal event for the industry.
The full list of mining experts interviewed in the video includes: Marco Streng, CEO of Genesis Mining; Thomas Heller, F2Pool Global Business Director; Sean M. Walsh, CEO & Chairman of the Board, Hyperblock Inc; Dr. Mervyn G. Maistry, Board Member Cyberian Mine; Carson Blake, CEO of SBI Crypto; Alexander Levin, CEO of Asicseer.com; Eric P. Yingling, an independent miner; Nick Damico, CTO at BitPatagonia; Hugh Tian, Co-founder of Antpool; and Åsmund Myhre, CEO of Oslofjord Datacenter.
In terms of the professional mining industry it seems we should expect to see a major concentration of the business as the halving will take place. Those with larger hashing power and access to cheaper sources of energy will squeeze out from the market operations that need higher margins to survive and make a profit. “The halving is a brutal wipe-out event,” explained Marco Streng. “It knocks out immediately the miners who are not efficient enough and shows no mercy.”
We might also see fluctuations and changes in global hash power distribution during the few weeks that are expected to pass between the BCH halving and the BTC halving, as SHA-256 miners will switch to the most profitable chain to mine at the time.
With regards to the effect the halving will have on prices opinions are more split. We could see prices double as miners will need to keep their current revenue streams, or even take off not long after as has happened in the past. “If you look at six months before the halving and six month after the halving in both previous instances you see massive upward surge in the price of bitcoin,” commented Sean Walsh. “It is a bit scary being a miner and knowing that your revenue stream is gonna get cut in half over night but the exchange rate will more than compensate for the reduction in our bitcoin denominated revenue.”
Watch the whole video on the official Bitcoin.com Youtube channel for the full remarks from all the mining professionals, subscribe and make sure to leave a comment to join the discussion.
What and When Is the Next Halving?
Every time a new block is mined, those who facilitated it are rewarded with a set amount of coins. But once every 210,000 blocks this set reward amount is programmed to decrease by half, hence the name halving. This mechanism was created by Satoshi Nakamoto to ensure current supply is limited, making coins more scarce as there will never be more than 21 million in circulation. It can also create upward pressure on the price in contrast to most fiat currencies that only lose value over time due to inflation.
The first ever halving took place in 2012 when the block reward initially set to 50 coins fell to just 25. The second and last halving so far took place in 2016 when the block reward dropped from 25 to just 12.5 coins.
The upcoming bitcoin cash halving event is expected to be during April 2020. After this happens, BCH miners will lose half the current block reward (12.5 BCH) and receive just 6.25 BCH and fees per block mined. The BTC halving is expected not far after that in May 2020. A German bank recently predicted a tenfold increase in the BTC price when the upcoming block reward halving takes place.
If you want to enter the crypto market before next year’s halving occurs, you can safely and securely purchase bitcoin cash (BCH) and bitcoin core (BTC) with a credit or debit card at buy.Bitcoin.com. You can also trade digital assets for cash in person privately on our noncustodial, peer-to-peer marketplace, local.Bitcoin.com, or try our recently launched premier trading platform, exchange.Bitcoin.com.
What do you think will happen to cryptocurrency prices after the 2020 halving? Share your thoughts in the comments section below.
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On October 31, 2008, on the eve of Halloween, Satoshi Nakamoto published the Bitcoin whitepaper. Since then the revolutionary design of the network has changed the lives of many and has transformed how we look at money today.
11 years ago today, at 2:10 p.m. Eastern Standard, Satoshi Nakamoto published the Bitcoin whitepaper to the Cryptography Mailing List. The service used was a pipermail message service hosted on metzdowd.com run by a group of cypherpunks. The mailing list message title was called “Bitcoin P2P e-cash paper” and Nakamoto explained that he had been “working on a new electronic cash system that’s fully peer-to-peer, with no trusted third party.” The anonymous creator also revealed that the paper was hosted on the website bitcoin.org.
Nakamoto emphasized in his email that the main property of the protocol was that “double-spending is prevented with a peer-to-peer network.” He highlighted that there was no mint or trusted third parties and “participants can be anonymous” if they choose to be. The first email detailed that “new coins are made from Hashcash style proof-of-work and the proof-of-work for new coin generation also powers the network to prevent double-spending.”
The Bitcoin whitepaper announcement wasn’t a huge deal at the time and really only a small number of people witnessed the message and replied. So three days later on November 3, 2008, he decided to write the mailing list again pitching the newly published paper. The Bitcoin inventor mentioned some of the same things that were said in the previous message published on Halloween. A few people had replied to Satoshi at the time and one individual seemed to like the idea, but he didn’t think Bitcoin could scale. Nakamoto dismissed the scaling issue casually and said: “Long before the network gets anywhere near as large as that, it would be safe for users to use Simplified Payment Verification (section 8) to check for double spending, which only requires having the chain of block headers, or about 12KB per day. Only people trying to create new coins would need to run network nodes.” Nakamoto continued:
At first, most users would run network nodes, but as the network grows beyond a certain point, it would be left more and more to specialists with server farms of specialized hardware. A server farm would only need to have one node on the network and the rest of the LAN connects with that one node.
‘P2P Networks Seem to Be Holding Their Own’
Nakamoto also mentioned concepts like Moore’s Law and told the person that it would take several years for the network to grow extremely massive and “by then, sending 2 HD movies over the internet would probably not seem like a big deal.” The same day, Nakamoto replied again in regard to a few attack theories that could be associated with dishonest nodes. Again being the master of his craft, Nakamoto quickly replied and explained that if a “bad guy does overpower the network” the miner would have to outpace the system and it would be much like “bouncing a check.” “To exploit it, he would have to buy something from a merchant, wait till it ships, then overpower the network and try to take his money back. I don’t think he could make as much money trying to pull a carding scheme like that as he could by generating bitcoins,” Nakamoto stressed.
More than a decade later, the Bitcoin network and the cryptocurrency ecosystem have grown massive. There are more than 3,000 digital currencies listed on market capitalization websites and there’s roughly a quarter of a trillion dollars in digital currency value being held by people worldwide. Satoshi Nakamoto’s paper and the network that went online the following January created a system of wealth that transcends borders, governments, and corporate control. Nakamoto highlighted two days after his third email that Bitcoin was merely an efficient tool and it wasn’t the cure-all against the monopolistic system of force that still exists in society today.
“You will not find a solution to political problems in cryptography,” Nakamoto remarked on November 6. “But we can win a major battle in the arms race and gain a new territory of freedom for several years. Governments are good at cutting off the heads of centrally controlled networks like Napster, but pure P2P networks like Gnutella and Tor seem to be holding their own.”
So far his forecast has been true and Bitcoin has ushered in a new form of money and a taste of true laissez-faire. People have been able to use bitcoin and many other cryptocurrencies to bypass state laws, sanctions, capital controls, and help people who need funds without restrictions. Since the birth of cryptographic currency, many other ideas have stemmed from the technological innovation and people are focused on building platforms like decentralized exchanges and concepts that utilize zero-knowledge proofs. The 11th anniversary of the Bitcoin whitepaper reminds people how powerful Nakamoto’s invention still is to this day and how it continues to transform the world of finance as we know it.
What do you think about Satoshi Nakamoto publishing the Bitcoin white paper 11 years ago today? Let us know what you think about this subject in the comments section below.
Image credits: Shutterstock, the Bitcoin white paper, the Cryptography Mailing List, and Pixabay.
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Mining rig manufacturer Canaan has filed for an IPO with the U.S. Securities and Exchange Commission to raise $400 million on the Nasdaq Global Market. Prior to this filing, the company had also attempted to go public in Hong Kong and China. Credit Suisse and Citigroup are among its underwriters.
Canaan Inc., a holding company that owns China-based Canaan Creative, filed a registration statement with the U.S. Securities and Exchange Commission (SEC) on Oct. 28 for an initial public offering (IPO). “We are offering American depositary shares, or ADSs. Each ADS represents Class A ordinary shares, par value US$0.00000005 per share,” the filing details. The company hopes to raise $400 million.
The underwriters named in the filing for the IPO are Credit Suisse, Citigroup, China Renaissance, CMBI, Galaxy Digital Advisors, Huatai Securities, and Tiger Brokers. The company plans to apply to list its ADSs on the Nasdaq Global Market under the symbol CAN. Canaan also told the SEC that, based on a report by independent research firm Frost & Sullivan which it paid for:
We were the second largest designer and manufacturer of bitcoin mining machines globally in terms of computing power sold in the six months ended June 30, 2019.
The company plans to use the proceeds to research and develop ASICs related to AI and blockchain algorithms and applications, expand its AI and blockchain business globally, optimize supply chains, and repay debts.
Canaan attempted an IPO in Hong Kong last year but let the application lapse in November. The South China Morning Post reported that Hong Kong regulators said IPOs by cryptocurrency businesses are “premature.” The company also attempted to go public in China three years ago through a reverse merger by buying a Shandong-based electric equipment maker, but that plan also fell through.
Canaan’s Nasdaq IPO filing comes only days after Chinese President Xi Jinping commented on the development of blockchain technology in China which sent shares of blockchain and digital currency-related firms soaring. Some even speculated that Xi’s speech caused the recent hike in prices of bitcoin and other cryptocurrencies.
About Canaan and Avalonminers
Founded in 2013, Canaan provides “supercomputing solutions through our proprietary high-performance computing ASICs,” its registration statement reads. The company currently sells bitcoin mining machines under the Avalonminer brand and mining machine parts. In July, the company started leasing its mining machines.
The company’s total revenue was $394.1 million in 2018, a 106.8% increase year-on-year, but its net income fell 67.4% last year to $17.8 million. For the six months period ending June 30, the total revenue fell 85.2% compared to the same period last year to $42.1 million. The company also recorded a net loss of $48.2 million during that time period.
According to the filing, since the company has less than $1.07 million in revenue for the last fiscal year, it qualifies as an “emerging growth company” pursuant to the Jumpstart Our Business Startups Act of 2012 (the JOBS Act). “An emerging growth company may take advantage of specified reduced reporting and other requirements that are otherwise not applicable generally to public companies,” the filing details.
The company recently introduced two new lines of Avalonminers: the A1146 and the A1166. The former rig processes bitcoins’ hashes at speeds of 46-56TH/s, with a power efficiency rated at around 57J/T, and a price tag of $1,978. The latter costs $1,204 and performs at 66-68TH/s with a power efficiency of around 47J/T. Both are expected to ship in February, according to the company’s website.
What do you think about Canaan filing for an IPO in the U.S.? Do you think the company will successfully raise $400 million? Let us know in the comments section below.
Disclaimer: This article is for informational purposes only. It is not an offer or solicitation of an offer to buy or sell, or as a recommendation, endorsement, or sponsorship of any products, services, or companies. Bitcoin.com does not provide investment, tax, legal, or accounting advice. Neither the company nor the author is responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any content, goods or services mentioned in this article.
Images courtesy of Shutterstock and Canaan.
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JAPAN, TOKYO, October 21, 2019 — Bitcoin.com, the world’s leading resource for cryptocurrency-related products and news, has launched the HashRace, a Bitcoin.com Pool promotion aimed at maximizing profits for its extensive network of Bitcoin mining clients.
The 180 day promotion, which began on October 21st, 2019, will reward miners with an unlimited hashrate bonus for directing their own hashrate to the Bitcoin.com mining pool. Every miner contributing at least 500 TH/s will receive a ‘hashrate bonus’ in the form of free hashrate, dependent upon the individual miner’s contribution over the course of the promotion.
The campaign, broken into two 90-day phases, aims to provide participants with the opportunity to maximize mining profitability before the upcoming Bitcoin halving, forecasted for the Spring of 2020.
During the initial 90 day accumulation period, promotion participants are encouraged to increase their hashrate bonus by directing as much hashrate as possible to the Bitcoin.com mining pool. Following the close of the accumulation period, participants’ hashrate bonuses will be locked in according to their hashrate contribution during the preceding Accumulation Period.
From the onset of the accumulation period, HashRace participants will receive hashrate bonuses based on the amount of hashrate contributed to the Bitcoin.com Pool. After the bonus lock-in, participants will continue to receive their hashrate bonus by maintaining a daily contribution greater than 50% of their average hashrate directed to Bitcoin.com during the accumulation period.
Hashrate bonuses will be received in 30-day intervals over the course of the promotion and participants will typically receive a 7.5 TH/s bonus for every 500 TH/s that they directed to the Bitcoin.com mining pool during the accumulation period.
In conjunction with The HashRace mining promotion, Bitcoin.com has also unveiled The HashRace Top 10 Leaderboard, which will display a real-time ranking of the top hashrate contributors over the course of the promotion.
A larger HashRace Leaderboard Bonus of 10 TH/s per 500 TH/s contributed incentivizes larger mining clients to compete for a place on this top 10 leaderboard.
Bitcoin.com is dedicated to providing industry-leading support and services to both new and existing miners. For more information on the HashRace promotion, visit mining.bitcoin.com/hashrace.
We are often told that the verification of bitcoin transactions eats a lot of energy. The largely inaccurate comparison to a small country, the size of Ireland or Denmark, is evoked thanks to numerous clickbait headlines. What mainstream media fails to explain, however, is that bitcoin mining is actually helping electricity producers prevent energy waste. Hydropower plants, for example, can generate and sell much more electricity during rainy seasons in some regions or when snow melts in others. Wastage can be mitigated through a symbiosis with bitcoin farms, at no additional cost for the environment.
During the prolonged winter the crypto industry had to endure, the mining sector saw its profits diminish almost to the point of no return. After another of Bitcoin’s prematurely pronounced deaths turned out to be a false alarm, miners are back exploring business opportunities. The days when mining companies were turning their ASIC rigs into scrap metal are gone.
With spring, prices unseen since last year returned to the crypto markets. In China, which controls a large portion of the global hashrate, the wet season, known in Eastern Asia as the ‘plum rain,’ brought lower electricity rates in provinces with developed hydroelectric infrastructure. The main ingredients in the recipe of profitable mining are back on the table. It’s been reported that miners are once again buying ASICs.
When rain starts pouring in May, rivers and dams in China fill up pretty quickly. Hydroelectric stations reach their peak capacity producing more than local industry and households need. That prompts authorities and utilities in provinces such as the southwestern Sichuan to bring down electricity rates to as low as 0.2 yuan (around $0.03) per kilowatt-hour (kWh), stimulating the consumption of cheap and green energy produced by hydroelectric plants.
Beijing-based Bitmain is among the companies taking advantage of lower electricity prices by utilizing surplus hydro power generated in Sichuan during the spring and summer months. Back in March, Chinese media reported that the mining giant had deployed around 100,000 mining rigs in the region before the start of the rainy season, with plans to install another 200,000 devices within the next few months.
Using hydro power for coin minting, when water levels are at their highest, is a win-win situation for both crypto miners and electricity producers. The cooperation can be highly profitable not only for the bitcoin mining facilities but also for energy companies as it allows them to raise the efficiency of their power generating capacities and ultimately increase their revenue.
Hydropower Plants and Cryptocurrency Miners Mint Coins for Mutual Benefit
Hydroelectric generation provides a great way to use excess power for cryptocurrency mining and also fund renewable energy, commented Shaun Chong, mining product manager at Bitcoin.com. He also acknowledged that mining profitability has improved significantly with rising crypto prices. “Cloud mining sales do a lot better during bull markets,” he said. The Bitcoin.com Pool is in partnership with mining datacenters in the U.S., Sweden and China. Chong noted:
All of them are using hydro power. All our cloud mining is powered by hydroelectricity.
Most mining companies working in Sichuan have direct contractual relations with the hydropower plants they build their farms at, Kirk Su, business development manager responsible for Bitcoin.com’s operations in China, told news.Bitcoin.com. The contracts do provide lower electricity prices for crypto miners. “Everyone gets different rates but they are typically around 0.2 RMB,” Su added. That’s around $0.03 per kWh.
Kirk Su himself runs a mining farm operating in Aba, Sichuan using electrical energy from a 150MW state-owned hydropower plant. His 10MW facility is considered a midsized farm in the province, which is home to 50MW and even bigger farms. “During the wet season, typically from April through November, these power plants will generate much more electricity than the grid needs. Hence, the excess power eventually goes to waste,” the miner explained.
Su noted that most companies in Sichuan work with private power plants as crypto mining in the People’s Republic is still somewhat a grey area. Some mining businesses, however, have managed to establish relations with state-owned enterprises. That actually provides them some protection against potential government crackdowns. On the flip side, these farms are more expensive to build as state enterprises are obliged to meet strict official standards.
Nevertheless, the cooperation is beneficial for both sides. “For the hydropower plant, they get to sell excess energy they wouldn’t be able to transfer to the grid during the wet season. For cryptocurrency miners, it’s obvious – we get cheap power,” Kirk Su pointed out. He further added that Chinese miners prefer to attract power plants as investors in their projects. The participation incentivizes energy producers to protect the mining farms from authorities when needed.
Lack of Predictability Hampers Mining Growth in the East
China, while very important for bitcoin minting at this stage, with its low electricity rates and authorities mostly turning a blind eye to mining, has one serious disadvantage – the lack of long-term predictability. The rainy season comes and goes year after year, but no one really knows when the regulatory storm will begin. The People’s Republic, just like many other countries in the Eastern hemisphere, including the former Soviet republics, offers miners a lot in terms of potential profits. But for many companies with insufficient local connections, the inability to ensure uninterrupted operations for years ahead is a major concern.
Russia, another country with a huge surplus of cheap energy, is also a good example in that respect. The collapse of many heavy industries following the dissolution of the Soviet Union left a third of its power generating capacities idling. Electricity rates in some energy-rich regions like Irkutsk can drop below $0.02 per kWh. The Siberian oblast, where the Angara River flows, is home to a large number of hydropower stations.
The local power company Irkutskenergo, which belongs to the large Russian En+ Group, announced last year a tender to lease five land plots to cryptocurrency mining farms and supply them with cheap electricity. The sites are located at its hydroelectric stations in Ust Ilimsk, Bratsk and Irkutsk, the largest of which has a generating capacity of almost 4,000 MW. En+ held talks with several mining investors in an effort to diversify its customer base. Another major operator, Eurosibenergo, also tried to attract mining businesses to some of its 20 power plants.
The realization of such partnerships, however, is hampered by the lack of a comprehensive legal framework for the growing Russian crypto industry. The adoption of a package of laws designed to regulate the sector has been postponed multiple times. For now, the future of cryptocurrencies in Russia remains uncertain and that applies to the mining sector as well, despite the more positive attitude of authorities in Moscow towards data processing in general.
Not as Simple as Parking a Farm Next to a Dam
This is precisely why Race-Cap, a company with interests in various blockchain-related fields and a partner of Bitcoin.com, has chosen Sweden for its high-performance datacenter and maintains offices in crypto-friendly Zurich as well as the global financial capitals London and New York. News.Bitcoin.com spoke with Race-Cap CEO Arthur Davis about the reasoning behind their preferences for mining destinations.
Davis believes Sweden and the United States are the two most important Western regions where a stable mining operation can be established. In his view, very important considerations when choosing a location suitable to crypto mining are regulations permitting this activity in the first place, favorable public opinion, and a stable tax environment. Next on the checklist are low energy prices and the presence of renewable sources ensuring “the best long-term natural value for all participants.”
Sweden, where Race-Cap has deployed its “Sky Computing” facility, as the entrepreneur calls it, meets these preconditions in one degree or another. Like any other mining hotspot, the Nordic country has its distinctions and they provide bitcoin miners with a different set of challenges in comparison with China. As Arthur Davis puts it:
One cannot simply look at parking an operation next to a hydro dam and thinking all will work well.
Unlike the People’s Republic, the energy system in Sweden is integrated with all power sources – hydro, wind, nuclear – feeding into the common grid. Energy is purchased from the market based on plugging into this grid at three levels of downstream availability, Davis explained. Only a power company may plug into the fourth, national level.
The price of electricity for end users has two components, as is the case in many other European countries. “Transmission” refers to the cost of consumed energy and the cost of “distribution” varies depending on where a consumer plugs into the grid. The higher into the grid the electricity is purchased from a distributor, or the closer to a primary source, the cheaper it is. There are certain advantages to being close to an energy producer. In terms of transmission, electricity is purchased from the open market at floating tariffs and any surplus from hydro sources is reflected in the spot price.
“There are pockets where one could build facilities near primary sources of power. But they are on a case by case basis. Even if power is available near a hydro station, it may be that the grid requires upgrading to take off the power, and this may be a 5 year process to actually be able to draw it down,” Race-Cap’s chief executive noted. “We have looked at a number of sites where the timeframe is 3-5 years to actually obtain the power near a primary power generation and transmission facility.”
The company’s mining facility is situated in Norrsundet, on the coast and in the middle of the country, which is the termination point for a planned enormous offshore wind energy development, which should be constructed in the next few years. Arthur Davis pointed out that Microsoft has recently purchased a big parcel of land to deploy datacenter infrastructure in the region, and Google has also reserved large-scale power in the area.
However, the crypto entrepreneur remarked that the proximity to efficient power generating facilities is not necessarily the only consideration. A decision to build and operate a datacenter should depend on the balance between all factors: “In the far north, where hydro power is plentiful, it may be too cold to properly operate the servers. We have seen other datacenters have significant issue with it being too cold, and therefore capital is required to invest to warm them up, somewhat counterproductive.”
A Government That Realizes Surplus Energy Needs More Consumers
Cold is not an issue in certain parts of South America that are also very rich in water resources and hydropower capacities. While many countries experience energy shortages, Paraguay is one of those producing more than they need. It is home to the world’s most powerful hydroelectric plant, built at the Itaipú dam on the Paraná River, which generates over 100 terawatt-hours of electricity annually. Another large hydroelectric power station is operating at the Yacyretá dam built over the waterfalls of Jasyreta-Apipé. The country currently uses only about half of the electricity the two power plants can produce.
Unlike other nations, the Paraguayan government has realized the benefit of having bitcoin farms next to its hydroelectric stations. A deal with two crypto companies aims to prevent energy waste. Bitfury Group, and the Korea-based Commons Foundation, announced earlier this year their new partnerships to create and operate mining facilities powered by the hydroelectric energy from the plants at the two dams. Authorities in Asunción have promised to provide five sites for the project.
Do you agree that energy producers and crypto mining companies should cooperate more closely to utilize surplus hydro power that would otherwise be wasted? Share your thoughts on the subject in the comments section below.
Images courtesy of Shutterstock.
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Since July 13, digital currency prices have dropped in value significantly, but most coins have since experienced some recovery. While many crypto supporters are optimistic on where the markets are headed, traders and analysts have noticed a bullish-to-bearish trend. BTC and a slew of other currencies spiked more than 10% at 11 a.m. EST on Thursday, however, indicating the bull market is still in play.
On Wednesday, cryptocurrency bulls were seemingly exhausted and bears had temporarily taken the reins, clawing back prices over the last week. Currently, the overall market capitalization of the entire cryptoconomy is $281 billion with around $83 billion worth of 24-hour global trade volume. The leading digital asset by market valuation, bitcoin core (BTC), is down over 8% over the last seven days. One BTC is trading for $10,622 after touching a low of $9,165 on Wednesday. BTC is followed by the second largest market cap held by ethereum (ETH) which has dipped by 17% this past week.
ETH is swapping for $225 per coin at press time as the cryptocurrency recovered 5.2% of its losses over the course of the earlier morning trading sessions. Following ethereum, ripple (XRP) is trading for $0.32 per XRP, down by 2.3%. Litecoin (LTC) is swapping for $101 per coin and down 1% over the last seven days. Bitcoin cash (BCH) is below litecoin’s market cap in fifth position as each coin is trading for $318, down 7% for the week.
Analyst Insists Libra Scrutiny Pushed the Price of BTC Down
This week has been interesting as U.S. congressional leaders discussed cryptocurrencies at great length to attempt to understand and regulate Facebook’s upcoming Libra coin. Public blockchains like BTC were described by politicians and cryptocurrency advocates over the last two days. Financial columnist and market analyst Naeem Aslam thinks the Facebook Libra investigations and politicians probing BTC pushed crypto prices lower. Most of the questioning and debate in Congress this week revolved around the creation of Libra, the cryptocurrency Facebook plans to launch in 2020.
For instance, many Democrat representatives including Alexandria Ocasio-Cortez seem to be against Facebook’s coin concept during the hearings. The New York Democrat representative asked Libra CEO David Marcus who backs the financial underpinnings of the planned Facebook currency. “So we are discussing a currency controlled by an undemocratically selected coalition of largely massive corporations,” Ocasio-Cortez said to Marcus, unimpressed with his testimony. Financial Services Committee representative Patrick McHenry (R-N.C.) commended Satoshi Nakamoto’s creation, meanwhile. However, Aslam writes this week that the congressional hearing and “the scrutiny of Facebook’s cryptocurrency has hit bitcoin’s price.” Sharing his opinion on July 17, the analyst stated:
Speaking purely from a price action perspective, the Bitcoin price declined as much as 8.9 percent during the hearing and for the week it is down nearly 16 percent. The price has found its support near the 50-day moving average which is trading at $9,311. If the price falls below the 50-day moving average, it is likely that the price may continue to move lower and find support around the area of $7,418. The 242-day moving, which has an impressive track record, is something that I am looking at closely. It is trading at $6,983 and the price must stay above this line in order for the bulls to keep their hopes alive.
The Dotcom Era
Ceteris Paribus from the crypto analytics firm Messari believes the current BTC market cycle is very similar to Amazon stock during the dotcom bubble. “Not all bubbles are created equal — The latest BTC cycle mirrors Amazon during the dot-com bubble, but the recovery has been much more swift — Even with the recent sell-off, bitcoin is 54% down from its high, vs. the 85% Amazon was trading at over a similar timeframe,” Paribus tweeted on July 17. “Why is this relevant? While different assets, they both traded on pure speculation — Bubbles follow similar patterns, but the quick BTC breakout has been extremely bullish. Only natural to see a bit of a pullback here — Still much further ahead than most people imagined in December.”
According to trader and analyst Filb Filb, miners will defend the price of BTC if it sinks to a certain point. “I have seen a lot of hysterical calls for bitcoin to find new lows and want to revisit a logical economics-based approach which helped me call the 2018 bottom to near perfection and why I do not believe bitcoin will find new lows,” the trader wrote on Wednesday.
By using certain tactics, miners will always maximize their rate of returns. “As Satoshi said himself rightly pointed out that commodity costs are likely to gravitate to production cost. Why? Because miners will sell into demand where revenue per unit > MC. Likewise, collectively they are disincentivized to sell when revenuedeclared. The popular trader added:
We have also seen the pre halving hype bottom out at 2x the cycle bottom historically — Go look for yourselves. Coincidence? I think not.
Money Managers Scour Forums and Social Media for Cryptocurrency Price Clues
According to a Reuters interview with Bin Ren, CEO of Elwood Asset Management, hedge funds and money managers are using algorithms capable of identifying cryptocurrency price clues throughout forums and social media platforms like Twitter. Reuters reports that the use of these algorithms has been growing fervently among traditional market managers. “It’s an arms race for money managers — Very few players are able to implement and deliver it, but I believe it is highly profitable,” Ren told the news outlet. Moreover, Bitspread, the digital asset management service based in London and Singapore, also uses social media algorithm techniques to profit.
“It’s a matter of gathering all the info, trying to understand who is trading where, what kind of liquidation can appear,” Bitspread CEO Cedric Jeanson said. “It’s a strategy that makes sense.”
Despite the Possibility of BTC Prices Declining Below $7K, Market Parabola Is Still in Play
Well known Twitter cryptocurrency analyst Mr. Anderson detailed that BTC has very strong parabolic trend lines and the lowest band is under $7K. Essentially this means that despite BTC’s current price decline, the bull run could still be in play. For instance, despite the 10-25% dips for most digital assets within the cryptoconomy, the majority are still way up in comparison to the December 2018 lows.
Any of the parabolic trend lines could act as a support for BTC but calling large ones is very difficult according to Mr. Anderson. “BTC Parabolic Curve: Calling the end of a large Parabolic Curve is NOT EASY — It seems obvious and that is why it is hard. We already have a couple of fairly logical para-trend lines that we had to cancel and we have a couple more that may end up being canceled as well,” Anderson explained on Twitter in reference to his parabolic trend line chart.
Worldwide Economic Fears, Cut Interest Rates and a No-Deal Brexit
Overall, digital asset markets have still gained significant value in the midst of worldwide economic fears. However, retail sales in June were better than expected according to economists and the jump in spending has given them hope. However, in the U.S. some speculators believe that the Federal Reserve might cut interest rates when members of the Fed convene on July 30-31. According to reports, the U.S. Treasury has already priced in the rate cuts in order to bolster loans and lending rates for mortgages.
Moreover, the possibility of a no-deal Brexit is being debated across the U.K. and EU. Economists fear that the U.K. will finally leave the EU monetary system, but waiting for Prime Minister Theresa May’s successor has paused an impending Brexit. With economists watching the global economy closely and politicians scrutinizing digital currencies, how all of this madness will affect cryptocurrency markets going forward is anyone’s guess. Today’s price breakout at 11 a.m, however, suggests that the crypto bulls are still in the game.
Where do you see the price of BCH, BTC and the cryptoconomy going from here? Let us know what you think in the comments below.
Disclaimer: Price articles and markets updates are intended for informational purposes only and should not to be considered as trading advice. Neither Bitcoin.com nor the author is responsible for any losses or gains, as the ultimate decision to conduct a trade is made by the reader. Always remember that only those in possession of the private keys are in control of the “money.”
Cryptocurrency taxation is a subject that concerns a growing number of users, traders and investors. An area that creates a lot of confusion among taxpayers is the application of VAT, or the value-added tax most countries levy on the sales of goods and services. Georgia has become the latest nation to free crypto-fiat transactions from VAT, a decision that affirms Bitcoin’s status as a currency. The same has already happened in many other jurisdictions, despite the absence of comprehensive regulations.
VAT-Free Crypto Exchange, No Income Tax for Traders
Traders of digital coins, both companies and individuals, will not owe VAT to the government in Tbilisi. That’s according to a newly adopted bill aimed at regulating the taxation of entities that trade or mine cryptocurrencies. The law was recently signed by Georgia’s finance minister Nodar Khaduri and entered into force at the end of June. The document provides a legal definition for decentralized digital money:
Cryptocurrencies are digital assets that are exchanged electronically and based on a decentralized network. Their exchange does not require a reliable intermediary and they are managed using distributed ledger technology.
From now on, residents of the South Caucasian republic exchanging coins to local or foreign fiat currency will not be obliged to pay the value-added tax. Furthermore, private citizens who conduct such transactions will also be spared from income tax. Khaduri stressed that the national currency, the Georgian lari, will remain the only legal tender in the country and using cryptocurrencies for payments will not be allowed. But that’s valid for any foreign currency as well.
Mining companies will have to pay VAT unless they are registered abroad. Georgia, which offers abundant and cheap electrical energy generated by its many hydropower plants, has become a regional mining hotspot over the past few years. Now many companies from the industry are likely to relocate their official headquarters to offshore zones while maintaining their operations in the Caucasus.
Europe Considers Bitcoin a Currency for VAT Purposes
So far, European countries have been trying to regulate cryptocurrencies almost in a decentralized manner. Bitcoin is often treated differently by tax authorities in various EU member states and elsewhere on the continent. Germany, for example, considers the purchase of digital assets an investment but capital gains tax is due only if the coins are held for less than a year.
For many practical purposes, the United Kingdom treats cryptos like foreign currencies. Residents of Bitcoin-friendly Switzerland are expected to pay income and profit tax on their digital cash holdings. Estonia applies capital gains tax on the profit from crypto investments while Slovenia does not tax the gains of individual cryptocurrency traders.
Generally, purchases and sales of cryptocurrency are not subject to VAT taxation in Europe, which is the birth place of the value-added tax. Financial regulators and revenue services in most countries often refer to a decision by the Court of Justice of the European Union (ECJ) which ruled in 2015 that services for the exchange of bitcoin with any traditional fiat currency are exempt from VAT.
Despite the absence of a common European approach towards cryptocurrencies in terms of VAT taxation, the topic has been discussed by the VAT Committee of the European Commission on several occasions. Different proposals on the treatment of digital assets for VAT purposes have been reviewed by the advisory body which provides clarifications on EU’s VAT Directive. These proposals include the classification of Bitcoin as currency, electronic money, negotiable instrument, security, or digital product.
Since the ECJ ruling, the case for accepting bitcoin as a currency has been gaining ground in the light of applicable VAT regulations. In essence, the court decided that the exchange between virtual and traditional currency constitutes the supply of services which are exempt from VAT under Article 135(1)(e) of the VAT Directive.
VAT Is the Cash Cow of Many Governments
Value-added tax (VAT) is a widely implemented indirect tax based on the increase in value of a product or service until it reaches the market. It is collected by retailers from end users and, in most cases, in the jurisdiction where these products and services are consumed. It’s usually a flat rate charged on the final value of the sold goods or provided services.
VAT is an important income source for many governments around the world. Well over 160 nations employ the tax and in certain countries like France it accounts for around half of the state budget receipts. It is generally considered fairer than the sales tax used in the U.S., for example, which can potentially be charged on itself as it is applied at each stage of production and distribution.
Wrapping one’s head around extensive VAT regulations can be a difficult task for many businesses and those in the crypto industry are no exception. But companies need to do so, as when they are registered under VAT laws they are entitled to apply for tax credit for the VAT amounts paid on the value of the materials and services used during production. The mechanism presents an opportunity to get some money back from the government.
Crypto-Related Services Pose a Challenge to VAT Rules
The ECJ ruling led to the issuance of additional interpretations by the VAT Committee that have no legal effect but can nevertheless be used as a reference by national authorities dealing with matters related to the VAT treatment of cryptocurrencies. One of them suggests that no VAT should be charged on the value of the digital coins themselves when they are used as a means of payment.
VAT is due, however, on the value of goods and services purchased with cryptocurrency. Their supply should be treated in the same way as taxable supplies of goods and services paid with fiat currencies. The taxable amount in such transactions should be the one received by the supplier. And if it is denominated in cryptocurrency, the tax should be paid on the equivalent expressed in the national currency of the respective EU member state at the time of the transaction.
Although these suggestions, detailed in a recently published article by PWC Cyprus, provide many answers pertaining to the VAT treatment of crypto transactions, important questions remain unanswered. And these are actually very hard to answer. For example, how do you define the appropriate exchange rate when reporting the value of a crypto transaction in fiat money?
According to the VAT Directive, if bitcoin is viewed as a foreign currency that could be either the latest rate recorded on “the most representative exchange market” of the member state or the latest official exchange rate published by the European Central Bank (ECB). The VAT Committee provides a third option as well: “the open market value of the virtual currency, determined under the responsibility of the taxpayer.”
Neither of these alternatives, however, are directly applicable to cryptocurrencies without more questions. First of all, there’s no central bank publishing a daily spot price for bitcoin. Second, cryptos are often exchanged on a global platform that may not necessarily be the most representative for a particular country. And third, how do you determine the abstract “open market value” of a volatile digital asset without selling it?
Other aspects of VAT taxation in the case of cryptocurrency transactions that the VAT Committee has attempted to clarify include the provision of wallet and exchange services as well as the verification of crypto transactions through mining. For instance, free wallet services are exempt from taxation but the advisory body believes that when providers charge fees, they should fall within the scope of VAT, just like Swift services offered by traditional banks. As for exchange services, they are exempt from VAT when the supplier buys and sells the coins as a principle owner. But where a platform acts as an intermediary between buyers and sellers and charges a fee for their access to its virtual marketplace, these services are subject to VAT.
Things are much more complicated with crypto mining. On the one hand, until miners are rewarded with newly minted coins, transaction fees are in principle paid voluntarily. That means they are still outside the scope of VAT. On the other hand, fees are paid in most cases anyway, as wallets usually have them as a default option and users are not willing to wait too long for their transaction to be processed. Currently, the European Commission’s VAT Committee supports the view that mining is an “essential activity for the actual transfer of funds,” which is closely related to the supply of digital coins and is not a support service. Hence, crypto transaction fees should not be subject to VAT.
What’s your opinion about the applicability of the VAT regime in regards to crypto-related transactions? Share your thoughts on the subject in the comments section below.
Images courtesy of Shutterstock.
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According to regional reports, the Central Bank of Iran (CBI) is planning to allow licensed cryptocurrency mining as long as operations are charged for electricity based on the price of export. The CBI governor, Abdol Nasser Hemmati, explained that mined cryptocurrencies should flow back into the Iranian economy.
Chinese Miners Negotiate With Iranian Leaders to Set Up Mining Operations in the Free Trade Zones
In December 2018, there were reports of miners stemming from China, Spain, Ukraine, Armenia, and France to mine bitcoin in the oil-rich nation of Iran. The Middle Eastern country has extremely cheap electricity rates, and in April there were even more stories of Chinese miners heading to Iran for extremely affordable electric prices at $0.006 per kilowatt-hour (KWh). Then, at the end of June, the spokesperson for Tavanir, an Iranian state-operated grid entity, said that electrical consumption had spiked by 7% in comparison to the previous year. Tavanir executive Mostafa Rajabi Mashhad further blamed illicit cryptocurrency mining operations for the country’s increased electrical consumption. Rajabi told the press that other Iranian provinces were having difficulties due to the mass electrical consumption and emphasized that “illegal bitcoin miners will be identified and their electricity will be cut.”
Following Rajabi’s statements, bitcoin miners defied his warning and Iranians shared pictures of a bitcoin mining mosque. The regional publication Iran Daily reported that there were roughly 100 unauthorized bitcoin mining sites located in various provinces. The Tabnak website claims 1,000 bitcoin mining machines were seized by Iranian law enforcement on June 28. “Two of these bitcoin farms have been identified, with a consumption of one megawatt,” a Tavanir official, Arash Navab, told state television. Bitcoin mining has become a very popular vehicle to escape sanctions across many provinces in Iran. “Everyone’s talking about Bitcoin and how to get it,” said Mahsa Alimardani, an Iranian native and researcher at the Oxford Internet Institute noted to regional reporters.
Then on July 10, Mohammad Sharqi, managing director of Iran Blockchain Association, told the local press that Chinese digital currency miners have asked Iranian officials to let them set up facilities in the country. Official discussions have been initiated and miners would like to operate in the Iranian free trade zones in Anzali, Kish Island, Qeshm Island, Chabahar, Arvand, and Aras. “The Chinese have made requests through official channels for cryptocurrency mining in the free zones,” Sharqi explained to the media. CBI’s deputy governor for new technologies, Nasser Hakimi, explained the same day that the local anti-money laundering authority had concerns with virtual currency trading. Sharqi thinks the stories of extreme electrical consumption have been exaggerated. Despite government warnings, according to an Iranian electrical industry spokesman, there are more than 148,000 machines in the country.
Central Bank of Iran Governor: ‘Bitcoin Mining Will Be Authorized if Miners Pay Export Prices for Electricity and Help Feed Funds Back Into the Iranian Economy’
Abdol Nasser Hemmati, the CBI governor, explained on July 10 that the government will authorize bitcoin mining in Iran even though Iranian bureaucrats have not finished regulating cryptocurrency trade. There are two caveats to the deal, Hemmati told the press, which will have to be followed strictly if mining operations are initiated in Iran. “Mining of the international digital currencies should be done based on the price of electricity for export,” Hemmati expounded. “What’s more important is that these mined currencies should be fed back to the national economic cycle,” the CBI governor added.
Hemmati warned the CBI would not tolerate a cryptocurrency that affects the price of the Iranian rial or gold. Reports also detail that Iranian law enforcement have already started to bust operations using factories, mosques, and utility service areas that benefit from extremely cheap electricity rates. At the export rate that’s charged to neighboring countries, bitcoin miners would have to pay $0.07 to $0.10 per KWh. The news outlet Presstv reports that the utility service area rates in Iran can be as low as $0.05 per watt. Electricity prices in Iran can be even lower in places like greenhouses and mosques for $0.006 per KWh as long as mosque leaders don’t mind breaking fatwa against the use of their subsidized electricity.
Iranian Leader Claims U.S. Congress, Donald Trump and Sanctions Have Been Hindering Iran’s Cryptocurrency Progress
Even at $0.13 per KWh, there are more than 40 SHA-256 machines that are still very profitable at today’s BTC prices. In some countries, electricity is higher or even double $0.13 per KWh so Iran’s power prices are quite affordable even with the export rate tacked on. Saeed Zarandi, the Iranian assistant minister of industry, trade and supply revealed to the press that the U.S. has been hindering Iran’s cryptocurrency progress.
Zarandi said that the U.S. Congress under the Trump administration has been harsh toward the country. Iran and the U.S. have been at odds again lately as the country’s military shot down an American drone and told the press it was in Iran’s no-fly zone. The U.S. and President Donald Trump claim the aircraft was in international airspace and not in Iran’s territory. Since then many observers have been worried that the U.S. may spark a war with Iran or vice versa. Zarandi asserted that members of the U.S. Congress believe cryptocurrencies could be used in Iran to avoid sanctions.
One specific set of sanctions called the Blocking Iran Illicit Finance Act is comprised of rules that make it hard for international companies to do business with Iranian financial institutions. H. R. 7321 details the expansion of prohibitions on correspondent accounts or payable-through accounts for foreign financial institutions. This includes banks that facilitate transactions or provide financial services for Iranian financial institutions. H. R. 7321 also displays a set of three rules to follow when it comes to Iranian-based digital currencies.
Sanctions with respect to foreign persons that engage in significant transactions for the sale, supply, or transfer to Iran of significant goods or services used in connection with the development of Iranian digital currency.
Sanctions with respect to foreign persons that conduct or facilitate significant transactions related to the purchase or sale of Iranian digital currency or maintain significant amounts in Iranian digital currency.
Report on the progress of the Government of Iran in creating a sovereign cryptocurrency.
The latest rules against an Iranian digital currency also follow the U.S. imposed sanctions against cryptocurrencies from Venezuela and more recently Cuba. Moreover, in November 2018 the American government convinced Swift to cut Iran off from the global financial system which pushed Iranian college students toward cryptocurrency to pay for books and online tuition. Furthermore, reports from regional news outlets in China claim that Iranian cryptocurrency miners have been scrambling to buy mining rigs from the mainland. With the CBI green-lighting bitcoin mining in the country, the inflow of funds could give Iran an edge over the imposed U.S. sanctions. With rules like the Blocking Iran Illicit Finance Act and major payment processors like Swift cutting Iranian banks off, the country may be forced to use a borderless currency.
What do you think about Iran’s central bank planning to approve authorized bitcoin mining in the country as long as miners pay export prices for electricity? Let us know what you think about this subject in the comments section below.
Image credits: Shutterstock, Presstv, Iran Daily, Tabnak, and Pixabay.
According to regional reports, a few publicly listed Chinese companies have been secretly mining bitcoin by pretending to provide cloud or web hosting services. Moreover, recent studies have revealed a growing trend of mystery miners processing the BCH and BTC networks at the same time as these firms have been running undercover mining operations in China.
Publicly Listed Companies in China Have Undercover Bitcoin Mining Operations
On May 29, Chinese crypto publication 8btc reporter, Lylian Teng, published a two-part study on a few publicly listed Chinese firms that have been secretly mining bitcoin. The first report came out on April 19 which discussed a construction company that suddenly started mining coins. Huatie Hengan is a subsidiary of publicly listed company Huatie and when investors discovered that the business was mining it caused an investigation from regulators. 8btc detailed that Huatie lost over $23 million during its tenure secretly mining bitcoin under the guise of a cloud computing operation. Additionally, the analyst discovered more publicly listed companies allegedly participating in the mining industry under the veil of secrecy.
In another instance, Wholeasy, a Chinese firm that operates as an internet game brand company in China and internationally has also been allegedly mining coins. The Chinese publication claims that Wholeasy contributed 17.7% of Ebang’s miner sales in 2018. Wholeasy also operates the PC media resources startup Mobcolor, a mobile digital advertising platform. In August 2018, the two firms announced that Mobcolor would “construct mining center for digital cloud computing.” 3G Venture would offer Mobcolor “90MW of power capacity at $0.055/kWh.” Moreover, the reports state that Mobcolor rented 65,000 Ebang mining rigs to another firm called VDIT. Mobcolor advertises support for crypto on its Twitter page whose header photo reads “Go farther with bitcoin.”
Besides Wholeasy, another Chinese operation called RHY has been purportedly building mining farms in places like Iran. A miner named Ma Jingguo told the regional news outlet that RHY is a NEEQ-listed public company in China. RHY does not hide the fact that it participates in blockchain mining and claims to power a 450MW facility with 300,000 miners. According to the miner Ma Jingguo, a great number of RHY mines are located in Iran and the firm was the first operation to invoke the #MininginIran hashtag on social media. In addition to Chinese miners migrating to Iran for extremely affordable electric prices at $0.006 per kilowatt-hour, many also flocked to Sichuan for cheap electricity during the wet season.
The news also follows the recent discussion by bureaucrats who have talked about banning bitcoin mining in China. On April 9, China’s state planner from the National Development and Reform Commission (NDRC) revealed he wanted to eliminate mining activity within the country. Reports claim that the NDRC said “[Bitcoin miners] should be phased out as they do not adhere to relevant laws and regulations, are unsafe, waste resources and pollute the environment.” The publicly listed firms participating in so-called secret mining operations have also occurred coincidently around the time when mystery miners have made up a good portion of the Bitcoin Cash (BCH) and Bitcoin Core (BTC) networks.
During the first month of 2019, blockchain observers noticed a growing trend of unknown miners processing blocks on these networks not seen since the early days. On Jan. 28, mystery miners accounted for more than 22% of the BTC chain’s hashrate and 17% of the hashrate on the BCH chain. Today those figures are lower, but unknown miners still account for 9.7% of the BTC network hash and 13.9% of the BCH hashrate. The mining industry that concentrates on the SHA-256 algorithm has also seen significant growth over the last few months and hashrate has increased on both networks as BCH and BTC values have spiked considerably. Even though crypto prices are high when Huatie Hengan reportedly dropped its construction efforts to quietly mine cryptocurrencies, 8btc’s research estimates the startup lost more than 90% of its net value in less than a year.
What do you think about the publicly listed Chinese companies secretly mining bitcoin? Let us know what you think about this subject in the comments section below.
Image credits: Shutterstock, RHY, Mobcolor Twitter account, Pixabay, and Coinmetrics.io.