Welcome to this week's edition of Overbit Insights.
According to Charlie Schumacher, director of corporate communications at Nasdaq-listed Bitcoin mining company Marathon Digital Holdings MARA, the crypto mining industry went from "a fringe movement, mostly full of hobbyists to a now very professionalised and institutional industry" in 2021.
"If you look back at what Bitcoin mining looked like a year ago, there were only a handful of companies that were publicly traded involved in the space," Schumacher said. "And if you look at everyone's market cap at that time, they're far below what they are today." Marathon Digital's market capitalisation rose to more than $3.5 billion from roughly $856 million at the start of the year.
According to statistics from Blockchain.com, Bitcoin's hashrate, which represents the total processing power provided to the blockchain network, decreased more than 50% to roughly 85 EH/s on a seven-day average basis in July after China began cracking down on crypto mining in May.
Since then, Bitcoin's hashrate has fully recovered, reaching a new peak of 182 EH/s in early December, as some Chinese miners relocated to the United States, Canada, and Kazakhstan, while others increased their capacity.
According to Whit Gibbs, CEO of Compass Mining, a crypto-mining marketplace, the firm witnessed "a big jump" in interest for those who want to mine Bitcoin at data centres in the United States following the China ban.
Now, as we advance into the new year, it appears most in the mining space expect competition to continue to ramp up. Marathon Digital's Schumacher predicts that Bitcoin's hashrate will quadruple by the end of 2022 as the industry sees increased institutional engagement.
"That obviously means the Bitcoin network is more secure, but then for us, it also means that it's a more competitive environment," Schumacher said.
Closing out this week's edition of Overbit Insights, we take a look at one of the world's most prolific billionaires - Ray Dalio - and yet another one of his comments on the budding Bitcoin industry.
Bitcoin, the most valuable cryptocurrency by market capitalisation, and its blockchain have captivated billionaire investor Ray Dalio.
"It has been an amazing accomplishment for Bitcoin to have achieved what it has done, from writing that program, not being hacked, having it work and having it adopted the way it has been," Dalio, founder of the world's largest hedge fund, Bridgewater Associates, told MarketWatch on Wednesday.
"Bitcoin is like gold, though gold is the well established blue-chip alternative to fiat money," Dalio said. "Bitcoin has a number of other issues. If it is a threat to governments, it will probably be outlawed in some places when it becomes relatively attractive," he said.
Bitcoin advocates regard the currency as a form of digital gold, a store of wealth, and an inflation hedge. This scarcity is at the heart of why Bitcoin bulls argue for long-term holdings of the cryptocurrency: as demand rises and supply falls, the cryptocurrency's value should theoretically rise.
Additionally, according to experts, a government's ability to properly outlaw Bitcoin would be extremely tough, which neutralises some of Dalio's perceived negatives for Bitcoin.
"I'm not an expert on Bitcoin," Dalio told MarketWatch, "But I think it has some merit as a small portion of a portfolio."
That concludes this week's edition of Overbit Insights! Take care, and have an excellent start to the new year.