No Asset Follows Trend Better than Bitcoin - How Price Corrections Create Opportunities for Miners to Expand Operations and Upgrade Mining Rigs
No Asset Follows Trend Better than Bitcoin - How Price Corrections Create Opportunities for Miners to Expand Operations and Upgrade Mining Rigs
Despite the recent correction from $13,880, Bitcoin has rallied significantly from the lows and is attempting to re-establish a long-term uptrend. Historically, the price of Bitcoin is perfectly positively correlated with the price of mining rigs. However, mining rig prices often lag price fluctuations in Bitcoin and have remained near their lows. This provides miners with a great opportunity to expand their operations before the long-term bullish trend is resumed in Bitcoin, and the price of mining rigs surges.
Past Trends – The 2016-2017 Bull Market Mania
On 10/13/2015, Bitcoin (daily bar) closed above its 200 day moving average (DMA) & did not close under the 200 DMA until 2/5/2018. That represents 846 days of a bullish long-term trend. In Q4 of 2017 alone, we witnessed the price of an Antminer S9 mining rig nearly double as Bitcoin continued to rally.
Past Trends - The Frigid 2018-2019 Crypto Winter
On 3/14/2018, Bitcoin closed below its 200 DMA. It did not close above the 200 DMA until 4/2/2019. That represents 384 days of a bearish long term trend. Over that same timeframe, we witnessed the price of an S9 decrease from $1,650 to $400. (See figure 9 from: https://www.blockwaresolutions.com/research-and-publications/how-bitcoin-miners-adapt-in-a-bear-market)
Just like any asset, Bitcoin experiences intermediate term retracements against the long-term trend (intermediate term correction in a Bull Market or intermediate term rally in a Bear Market), but overall Bitcoin is a trend follower’s dream.
On 6/26/2019, Bitcoin topped out at $13,880 and has been correcting for 206 days - a long, healthy correction. Bitcoin is currently forming a base, as price approaches the 200 DMA once again… The longer the base, the higher in space!
Bitcoin historically has a strong behavior of respecting its 200 DMA. A daily bar close above the 200 DMA would provide confirmation that a new uptrend has begun, and mining rig prices will undoubtedly begin to increase as Bitcoin rallies.
As Bitcoin continues on its bullish long-term trend, mining rigs remain relatively cheap. In October, while Bitcoin was trading at $8,000, an Antminer S17 53 TH/s was selling for $2,750 from Bitmain. Today, with Bitcoin once again trading above $8,000, an Antminer S17+ 64 TH/s is priced at $1,585. The deviation between these two data points presents a great opportunity for miners to expand operations or upgrade their old-generation hardware before the May 2020 Bitcoin Halving.