BTC Sessions - Bitcoin’s 2nd Largest Difficulty Drop Ever, Fed Printing Up To $6 Trillion, Stocks Pump Despite Record Job Losses EP034

Starting point is 00:00:01 Wasabi wallet. I'm fairly private. What's up, everyone? I'm Ben with the BTC sessions, and this is your daily session. Before we dive into the news, of course, shout out to sponsors of the show, leaden.com. This is where you can use your Bitcoin for a variety of different services. They've got their Bitcoin savings accounts where you can earn interest on your Bitcoin. They've got their Bitcoin-backed loans. This was actually the first server. I ever used of theirs, and it's where you can use your Bitcoin as collateral to obtain a Canadian or U.S. dollar loan. So in my case, I was actually in a bit of a pinch around this time last year.

Starting point is 00:00:46 I needed to get my hands on some dollars, but I really didn't want to sell my Bitcoin because I was worried that the price may go up and I may not be able to buy back as much, which ended up being the case had I sold. Luckily, I was able to plunk it into one of these loan accounts. I was sitting in an address that I could audit 24-7, and then when I paid back the loan at a later date, I got back all of my Bitcoin, and it was a huge lifesaver for me. So if that's a situation you might be in, then could be a possibility for you. And then finally, they've got their B2X offering. This essentially uses your Bitcoin as collateral, gets a loan, and then buys more Bitcoin with it automatically, doubling your Bitcoin on the spot. So for those of you that are super

Starting point is 00:01:32 bullish on Bitcoin and want double the Bitcoin in order to experience those price fluctuations, that could be a good option your way as well. If you want to check out any of this, there's a link in the show notes down below. And if you opt to get a loan with them, they'll actually credit you with an additional 50 bucks worth of Bitcoin into your account. And secondly, we have Paxful. This is an online peer-to-peer Bitcoin marketplace where you can buy and or sell Bitcoin. This is particularly useful. for those of you that need a lot of different payment options. They've got tons. They've got your traditional bank transfers, interackey transfers, all of that. They've got the more popular payment apps like

Starting point is 00:02:12 PayPal and cash app. And then they've got some less traditional methods of paying for Bitcoin, which would be things like buying Bitcoin using gift cards. Now on the flip side of this, and I should mention that they have damn well, well over 300 different payment methods here. So wild. Now, on the flip side of this, you can make quite a bit of money if you are set up as a merchant on Paxful. So buying and selling Bitcoin back and forth and making some money on the spread. So there's opportunities there. They've got a killer affiliate program as well. And if you're looking for cheap gift cards, I don't think there's a better place.

Starting point is 00:02:49 I've seen Amazon, Starbucks, Walmart, things like that for like 20, 30, 40 percent off. So pretty crazy. Be sure to check out Paxful.com. There's a link again in the show notes down below. And with that, let's dive into the news. So, Bitcoin has experienced the second biggest percentage drop in mining difficulty in its history. Now, this was due in large part to the drop in price recently, which made a lot of miners, which were operating on very thin margins, have to shut off their machines because it wasn't no longer cost effective to run them. and we did see very long waits for blocks to propagate because of this, but with the difficulty

Starting point is 00:03:36 adjustment, all is right with the world again. And usually that takes about two weeks to retarget and when a large amount of hash power drops off the network, sometimes it can take a little bit longer. So if, say, half of the hash power dropped off the entire network instead of a two-week retarget, it would take four weeks. So just to kind of keep that in your head. So how much did it drop? It dropped by 15.95%, so around 16%. So the drop in mining difficulty signals that some miners have bowed out of the ongoing race to solve math problems to win freshly minted Bitcoin as a decline in the cryptocurrency price has made this activity less profitable. That said, the drop could work in favor of those who have chosen to stay in the game as less

Starting point is 00:04:22 competition means individual miners would gain a bigger cut of Bitcoin. Bitcoin's daily mining output. The world's largest blockchain by market capitalization adjusted its mining difficulty around three UTC time on March 26 to 13.91 trillion tarahash down from 16.55 terahash in the previous cycle recorded on March 9th. Two weeks ago, Bitcoin, of course, suffered its worst sell-off in seven years, in dollar terms, and has only partially, and has only partially recovered. So we're sitting up around the $6,700 range. We were around 8K at the time of that huge dump. We went all the way down to four and we've kind of recovered back close to the 7K range. We've tapped it a couple times. So we'll see how we power past that. Now, if you look at the chart

Starting point is 00:05:17 here, you can see, you know, the significant drop in hash power. We're around 75 terra hash right now. But if you go back, really, like, we were around these levels in and around December, so three months ago or so. And we were pretty consistently down at these levels three months ago. So it's not that much of a step back. And the network was designed to deal with these kinds of things. So if it suddenly becomes unprofitable and miners drop off, well, you don't want slower blocks. So that's why that retargeting mechanism is there, which turns it into a profitable endeavor for miners once again. And that's what this article on crypto briefing here that I'm looking at now is talking about.

Starting point is 00:06:06 So it says this drop will offer a boost to existing Bitcoin miners who will now need less computing power to achieve the same probability of mining a coin. This adjustment will increase their revenue and possibly even cause them to increase capacity. block times have been affected by a combination of high difficulty and low minor input. Bitcoin blocks were being mined either too slow or too fast. Yesterday, there were just three blocks mined in three hours. And earlier today, there were nine blocks mined in one hour. The result is block times of one hour and seven minutes respectively. So hash rate dropped again from 136 x-hash to 75.

Starting point is 00:06:52 5xash, which we just looked at since the beginning of March. Older machines, which account for a lot of the competing power, may have been taken off line and mass by mining farms. Nevertheless, competing power is expected to move back up, thanks to the reduction in mining difficulty. And I wanted to touch on this Twitter thread by Matt DeSuzza. Kudos to this guy for summing it up very, very nicely. What's going on in terms of if you're holding Bitcoin and you're wondering.

Starting point is 00:07:22 what happens to price in relation to miners and mining cell pressure and halving and all of that because the halving is again just around the corner where we're what 40 48 days out i think we'll get to that in a moment but anyways i'm going to read through his twitter thread and just give you guys an outline of what the implications of a reduced reward for miners will do will likely have in the coming months here. So it says if you're a trader or investor in Bitcoin and don't understand that the primary source of sell pressure on the price of Bitcoin comes from minors, it is in your best interest to research minor cell pressure, difficulty having 2020, and minor capitulation below. And he does link to an article here. But he said, today we witnessed

Starting point is 00:08:11 one of the largest difficulty reductions in Bitcoin history. In the past, extreme difficulty reductions signal favorable probabilities for long-term capital deployment. So what he's talking about is when there are these sudden capitulations in Bitcoin mining capacity, it tends to be pretty favorable for the future outlook of Bitcoin price, oddly enough, even though it seems counterintuitive. And so take a look here. He has a list of major drops in hash power, drops of 13, 18, 11, 11, 15, 9, and 16%, which is the most recent one, so there's no data there.

Starting point is 00:08:51 But just to give you an idea of some of the price changes that have resulted in the short to mid to long term, well, long term as far as 12 months anyways, after these capitulations have happened. So going down the list here, a three-month price change from these top five drops in hash power plus 80%, plus 46%, plus 557%, but two to the negative here, negative 29% and negative 7%. Now what if we jump six months out from these huge drops and hash rate? So six months change out from every single one of these bigger drops and hash rate.

Starting point is 00:09:39 All of these are in the positive. So you have plus 20, almost 29%, 49%. 49%, 600%, 41%, and 106%. And if you go 12 months, again, all in the green, 209%, 230%, 5,192%, 51%, 51%, 51%, 51%, 51%, 51%, and 82%. And when you go across the board of the average, down three months, 129%, 6 months, 165%, and 12 months, 1,153%, so I mean, again, not necessarily saying that this will be the case this time around, but historically speaking, you know, six months out, you're sitting pretty after a major capitulation like this when it comes to hash power. Now, moving on with this thread here, he says, yes, many leveraged

Starting point is 00:10:34 traders blew out with the recent price decline, but Bitcoin continues to show exhaustion because there are still 54,000, which was $540 million when Bitcoin is 10 grand, which obviously it's much lower than that, of newly minted Bitcoin released each month to miners. A significant percentage of which must be sold to Fiat in order to fund their electricity expenses. This generates consistent sell pressure on the price of Bitcoin. Extreme difficulty reductions indicate that inefficient miners were forced to shut down, minor capitulation. Now, these miners were operating on thin margins and therefore were forced to sell all of their mining rewards. They were the primary source of minor cell pressure in the network.

Starting point is 00:11:18 So the ones that just dropped off, odds are they were selling everything that they were making just to make ends meet. So the ones that capitulated were the biggest sellers of Bitcoin. Now, continuing on. After shutting off, Bitcoin they were receiving is allocated to the more efficient, experienced, miners with excellent margins who are positioned to accumulate a larger percentage of the newly minted Bitcoin rather than having to sell it, significantly reducing cell pressure. So the miners that were able to weather the storm of a drop to 4K and a sustained drop above the 8K that were used to are now picking up the piece of the pie for all of those miners that were that capitulated.

Starting point is 00:12:04 And so now their profit margins are actually up, which means they don't need to sell as much of their Bitcoin right now onto the market every single time. And so they say, again, he says, they were receiving, after shutting up Bitcoin, they were receiving as allocated to the more efficient miners. So that significantly reduces selling pressure and establishes a healthy environment for Bitcoin to advance. So, excellent, excellent summary here. Again, a lot of those miners that all of a sudden had to turn off their machines, they were selling everything they were getting. And now they're out of the market and likely going to wait for higher prices to come back in. And so now all of these super efficient, highly profitable miners are getting more.

Starting point is 00:12:58 And they're going to be selling less because they don't need to in order to make those. ends me. So, yeah, awesome. Good to hear. Now, some other people that capitulated are some Bitcoin holders that sold at heavy losses in the market freefall. So just a quick note here. There is a group called Token Analyst. They observed a notable rise and inflows to CryptoExchange OK, OK Exchange. The exchange witnessed 11 deposits totaling approximately 23,000 Bitcoin. Per the data, the Bitcoin held a median purchase price of $12,815. So the Bitcoin that came on to the exchange, the median price of all of that Bitcoin was originally bought around 12, almost 13K, and deposited at a price of $6,459.

Starting point is 00:13:56 Again, median. So if traders sold their holdings then, losses would have added up to 146 million. So those people that put that Bitcoin on exchanges, if it was all sold, and again, there was probably just some trading timing going on there, but if it was all sold, it would have been at a significant loss. What about you?

Starting point is 00:14:20 Did you dump? I stacked. I stacked some more sets during this entire drop. Anyways, let's move on. Now, one of the positives coming out of the craziness in the market is that there's more demand for physical delivery of Bitcoin in the backed futures market. So they have the ability to basically bet on the future price of Bitcoin. And upon the conclusion of that contract, you have the ability to demand the physical delivery

Starting point is 00:14:55 of actual Bitcoin instead of just having paper slips. Now, traditionally, not traditional, I mean they've been around for a little while. But anyways, we've largely seen most people not demanding the physical delivery of Bitcoin, but rather just doing paper trades and rolling them into subsequent trades afterwards. But with the craziness in the market, there's actually been a sharp rise in the demand for physical delivery of Bitcoin. So it says here on CoinTelegraph, physical delivery of Bitcoin for futures on the intercontinental exchange. ICE's backed platform is going strong despite tumultual month for the markets. Data from arcane research posted on March 26 reveals that as of March 20th,

Starting point is 00:15:42 the number of traders opting to receive physical delivery of the cryptocurrency rose 44% on the month. So a sizable, sizable increase in physical delivery. Now speaking of people panicking in the markets and wanting to get their hands on the actual underlying asset, This is across the board. It is not just Bitcoin. Though, again, Bitcoiners, no, not your keys, not your coins. Get it in your own possession. Mitigate your risk and try not to rely on custodians unless you are actively trading or you need to obtain some sort of a service.

Starting point is 00:16:19 But again, mitigate your risk. Try to minimize any coins that you have in the custody of somebody else. And, I mean, participate in things like proof of keys. Pull it off. make sure that you have your self-sovereignty. All right. Now, as I was saying, this is across the board. People are demanding physical delivery of also gold.

Starting point is 00:16:42 And gold is in very short supply right now for a variety of reasons, but we're going to touch on that. So here, this article from Financial Times, they say traders have reported a growing global shortage of gold bars as the coronavirus outbreak both disrupts supply and Stokes demand. with one business comparing the frenzied buying of the yellow metal with the consumer rush for toilet paper. Retail investors in Europe and the U.S. have bought up gold and silver bars and coins over the past two weeks in an effort to protect their money from the collapse in global stock prices and many currencies. Now, the thing about gold is that a lot of people only own it as paper, basically paper certificates, a promise of delivery in the future of the physical gold. The thing is, that physical gold isn't actually there. It's re-hypothicated to shit.

Starting point is 00:17:42 You own a piece of paper that says you own a bar of gold. Well, guess what? Ten other dudes own the same piece of paper claiming the same piece of gold. It's the reason that the gold standard failed was people relying on slips of paper instead of the actual physical asset. And that's due in part to some of the qualities of gold where it is difficult to secure reliably on your own. And when you leave it with a trusted third party,

Starting point is 00:18:14 then that person can one fractional reserve, two, it's easy to confiscate, which both of which happened. Anyways, so people are having a hell of a time trying to get their hands on physical gold. And the funny thing is, is that the paper certificates on stock markets have not seen a massive increase in price. But when you look at actually obtaining physical gold, there's a massive markup on this, sometimes 10%, sometimes even more, depending on where you're going for it. So be aware, not your vault, not your gold.

Starting point is 00:18:49 And then further to that, obviously we touched on this in the show just the other day, but the FDIC, put out an ad the other day, more or less begging people not to do a run on the banks and saying that you don't need to go get your cash out of the bank. The cash is fine. The thing is, again, they released a video, they discourage people from withdrawing money from banks, but it came at a time when the reserve requirements for banks in the states has been reduced to zero. That means the bank needs to have zero money in order to lend out money, which is insane. And again, people in crypto and in Bitcoin obviously see right through this, but by and large, most other people are looking at this going, this shit's crazy. They're reassuring us that the bank is fine.

Starting point is 00:19:42 Something's not right with the bank. Anyways, crazy, crazy. Now, moving on here, again, the Federal Reserve is preparing to print unprecedented amounts of money. Now, they are, after days of discussions between both the Democrats, on the Republicans, they hammered out an initial $2 trillion deal. And so this is a bipartisan agreement on a historic relief package for this pandemic said by Senate Majority Leader Mitch McConnell. But that's just the start. The Federal Reserve has pledged to print as much as $6 trillion, and there could be even more to come. According to figures from the National Review,

Starting point is 00:20:24 of the total, $4 trillion will come in the form of liquidity from the Federal Reserve, which stocks basically, bailouts. The remaining $2 trillion will be part of the proposed phase three legislation from Congress. If the total assistance does reach $6 trillion, that would equal about 30% of the U.S. GDP. Holy shit. Okay. Now, the crazy thing is all of that printed money, where is it going? It's going right into the stock market to prop it up. which had just dumped like 37%, something like that.

Starting point is 00:20:59 Take a look at this headline from the Wall Street Journal. Breaking, a new bull market has begun. The Dow has rallied more than 20% since hitting a low three days ago, ending the shortest bear market ever. Take a look at the stocks today. Dow was up 1,300, 350 points. It's now sitting at 22,000. 500 and it was down in the 18,000s just the other day. The only thing causing this is the Fed pumping

Starting point is 00:21:33 the fuck out of this thing and just printing. The money printers are going wild. They're just buying everything. It's insane what is happening here. The thing is people are no longer going to have the wool pulled over their eyes when people say that the economy is great and in a bull market, when you have U.S. jobless claims jump to 3.28 million quadruple the prior record. Look at this fucking graph here. These are the U.S. jobless claims all the way back from the mid-60s to today. And what just happened today with the new jobless claims of 3.28 million essentially ruined the entire chart.

Starting point is 00:22:20 It's more or less, it's unreadable. at this point. You cannot see any of the nuance over the past what how many decades. It's insane. It's absolutely insane. This is like six decades of data just dwarfed in a single day. This is not just the the axis of the chart. That line is the bump in jobless claims in a single week. In a single week. It's absolutely insane. It looks like it's just the edge of the chart, but that's just because it's the entire chart. That's how large.

Starting point is 00:23:05 And this is just the beginning. This is just shutting down retail. So you have, you have stores that have shut down now and malls that are shutting down. You have places like cheesecake factory saying like, hey, April 1st, we're not paying any of our rent. How many people are not going to pay rent

Starting point is 00:23:23 on April 1st because they're out of a job. 3.28 million people are out of a job. How many of those are not going to be able to make rent in a few days here when the month rolls over? And what are the implications of that when all of a sudden all of those major real estate companies and and reits and everything all the sudden that money that normally comes in is not there? Are they going to start to default? I think we've just begun to see the beginning of the implications of what is happening with the economy, with the world economy right now. It is bonkers. And for the Wall Street Journal to be tweeting out that a new bull market has begun is so

Starting point is 00:24:09 fucking irresponsible, it blows my mind. I cannot believe that this is a real tweet from a real news source. It is, I can't. Like, I know that they're just. just going by percentages here and 20% up means bull market. But in a situation like this where you've literally dropped 30, 40% in a couple of weeks and rebounded in three days, I think we can throw out the definitions of bull and bear market because we haven't seen fucking anything yet.

Starting point is 00:24:46 Oh, man. Guys, guys, I cannot. Okay. I'm going to wrap it up with it. a couple things here, a couple tweets. So this one from Cold Hands Crypto, he says, the U.S. government with the help of the Federal Reserve will spend more currency in the next few days and weeks than all governments from the founding fathers to Bill Clinton combined. This exceeds all costs of the Civil War, World War I, and World War II. This is unprecedented and this will

Starting point is 00:25:18 not end well. And from Jameson Lop perspective, the United States just announced the creation of nearly 50 bitcoins worth of dollars out of thin air, not 50 BTC, but 50 Bitcoin networks. And in the face of all this, in the face of all this, the Bitcoin block reward having marches forward. It is still going to happen. I'm looking at the ticker now, 48 days and around 45 minutes and there will be a reduction of new coins coming on to the network by half. Twelve and a half every ten minutes right now. By May 14th is what it's projected at around 843 UTC time. There will be 6.25 every 10 minutes.

Starting point is 00:26:11 That also means that any miners that are on thin margins, again, may capitulate. but that means the ones that are profitable and efficient will pick up the pieces and they'll be selling less. They have to sell less because they don't have as much to sell. And then we see what happens moving forward from then. We will see. Is it a repeat of 2013 and 2017? Maybe.

Starting point is 00:26:44 I don't know. I'm inclined to think so, but I'll let you. draw your own conclusions. Anyways, guys, I will wrap it up there. As always, do hit like, subscribe and share if you're watching this on YouTube. If you're listening to this on audio only on the pod, be sure to, of course, subscribe wherever you're listening, give it a share on your social media. And if you can, take the time to write a review because it really, really helps with visibility. And I have been noticing an uptick in listeners on the pod, which is a very positive thing. So thank you guys for that. Now, if you want to help out the show in another way,

Starting point is 00:27:14 of course, hit up the sponsors I mentioned down below. That was Ledin and Pets. Paxville, and of course, wasabi wallet, which is very helpful for your Bitcoin privacy and separating the links between you and your coins. And outside of that, if you really loved what you saw, you can always drop me a tippin.me. Lightning Network tip. My tippin.combe page, that's tippin.combe slash at BTC Sessions. And with that, I'm out. Have yourself a wonderful evening. Stay safe, stay healthy. And I'm going to see you guys next time for your daily session.

BTC Sessions - Bitcoin’s 2nd Largest Difficulty Drop Ever, Fed Printing Up To $6 Trillion, Stocks Pump Despite Record Job Losses EP034

There aren't comments yet for this episode. Click on any sentence in the transcript to leave a comment.