Fear of Mining ‘Death Spiral’ Blocks Path to $100,000 Bitcoin
Bitcoin Halving Won’t Cause Mining ‘Death Spiral’
Without any doubt, we can say that such a development model is possible since the offer of the main digital currency of the XXI century will fall to 6.25 BTC.
Considering the process in more detail, we understand that the network automatically regulates the extraction of coins every year, when the hash rate of the network decreases, miners get the opportunity to play BTC with less difficulty. In the opposite situation, when a cryptocurrency asset rises in price, the level of mining difficulty increases.
In this case, if this mining is stopped, Bitcoin will cease to exist as a result of which the miners are drawn into the “death spiral.”
So what is the Deadly Spiral? Simply put, this is a situation where the complexity of the network is not regulated since the hash rate continues to fall rapidly, as miners are massively disconnected from the network.
One of the cryptocurrency analysts asked subscribers about the situation that will happen after Bitcoin recently began to reduce supply. After such a reduction, there will be no “death spiral” to which more than half of the respondents came. Miners in the BTC ecosystem have a long-term strategy, which once again confirms this fact.
There is a possibility that miners will begin to drive themselves into the “death spiral”, in which case they will need to throw coins into the market, lowering the price and making mining less profitable.
Are these misunderstandings an obstacle to BTC growth?
For a trader PlanB (@100trillionUSD), such misunderstandings do not represent a risk or an obstacle to bitcoins. In the article “Modeling the value of scarce bitcoins,” the analyst cites the case when the ratio between the size of the existing reserves of the asset and the number of producers of this asset can be created every year.
Bitcoin is a digital product (not universally recognized), unlike gold, that is used as a repository of values. Still, at the same time, it shows a high ratio of reserves to flow on a par with gold.
One of the most famous commentators in the cryptocurrency industry is related to Plan B, where it is noted that bitcoin stocks are forcibly adjusted every four years as a result of a halving. As a result, a decrease in stock-flow creates a more accumulated asset.
Plan B seems to be based on the idea that the same scenario could be reproduced in the next couple of months before it is split into two.
According to the latest news, the same analyst predicts a possible increase in bitcoin to $ 100,000, and possibly even more.