The “Bitcoin mining death spiral” debate explained | Polychain's #2 exec leaves leaves the firm amid weak 2018 performance
|Dec 4, 2018||Public post|
“It is hard to grow a strong business in a bull market because you aren’t forced to make tough decisions. Tough decisions leads to better allocations” — Ari Paul, Co-founder BlockTower Capital
The Big Block
Bitcoin is not going into a “mining death spiral.”
Now that we’ve gotten that out of the way… rather than fear-mongering, The Block is committed to clarifying comments and concerns posed by crypto-fund managers and enthusiasts alike with level-headed technical clarity.
The case that Bitcoin is going into a miner-induced death spiral is intuitively compelling: Bitcoin prices drop materially, eventually marginally profitable miners shut off, ad infinitum, until all the miners are gone and no one mines Bitcoin (cue: Bitcoin is dead, redux).
The argument is crutched on a few core assumptions often relied on by critics: $BTC would have to trade sub-$1000, with hash rate dramatically dropping off before the difficulty adjustment, the variable representing the difficulty of mining a new Bitcoin block. Miners, who are strictly rational short-term, would then choose to shut off all their miners or mine alternative cryptocurrencies rather than take losses mining Bitcoin unprofitably.
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Around The Block
Polychain’s #2 exec Ryan Zurrer leaves the firm amid weak 2018 performance
A founding principal at $1 billion crypto-investment fund Polychain Capital is no longer with the firm, The Block has learned. Ryan Zurrer left the firm in recent months and will continue to advise firms including Polkadot, a Polychain-backed blockchain project, in his existing role as a Web3 Foundation Council member. — More
Crypto hedge funds are getting creative as the bear market continues to grip crypto
The crypto explosion of 2017 gave birth to hundreds of hedge funds aimed at generating asymmetric returns from the speculative “crypto asset class.” However, this year’s downwards price action is creating a lot of problems for the once high-flying funds, forcing many to shut and others to explore creative ways to stay afloat. Per Crypto Fund Research, 35 cryptocurrency funds have closed shop since the beginning of the year, 5% of the 633 funds the research firm tracks. As for the funds that haven’t shut down, many are identifying new opportunities in the market or cutting costs, an expert tells The Block. — More
Bitcoin’s mining difficulty saw the largest drop in the ASIC era — More
U.S. Government wants to research ways to perform forensic analysis of Monero and Zcash — More
A group of Wall Street giants, including Fidelity, pour $27.5 million into ErisX — More
Bitfinex and Ethfinex to support four additional stablecoins — More
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