Thursday, March 28

After today’s crash, Bitcoin falls below the price at which it makes up for the electricity it spends, now what?


The value of cryptocurrencies continues to free fall, and cryptocurrency miners face a dilemma: hold on, or lose money?

The Bitcoin priceat the time of writing this news, is €22,372what it means a drop of more than 15% in just one day. Very far from the 65,000 euros of its maximum price, in November, or from the 100,000 dollars that it intended to reach in 2022.

Other flagship cryptocurrencies, such as the ethereumthey are the same: today it is worth €1,186also 15% less than yesterday.

For Bitcoin it is not one more fall: has fallen below the “freezing point” that some experts have fixed so that it is profitable to continue mining cryptocurrenciesor maintaining the network.

Bitcoin

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What is the reason for today’s massive drop? To the problems that cryptocurrencies have been experiencing in recent months, associated with the ban in some countries, the invasion of Ukraine and the crisis in raw materials and fuel, we must add the collapse yesterday of Celsius Network.

It is an important cryptocurrency lending platform, which has frozen the operations of its clients because it has no money in the face of the avalanche of sales, and the fall of its own CEL cryptocurrency. The same has happened with Binance, which has had to stop trading for over an hour, although he has already resumed them.

Why is this drop in Bitcoin so important? It is estimated that the network that manages Bitcoin consumes between 180 and 200 TWh. That is more electricity than many entire countries the size of Ireland or Argentina.

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A few months ago, the economist and Bitcoin expert, Alex de Vries, carried out a study in which he claimed that if Bitcoin fell below $25,200the cost of electricity required to maintain mining equipment and managing the blockchain is close to what they earn from mining new bitcoins and managing the blockchain.

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It is simple words, miners are approaching zero profits. Without benefits, many miners would consider going out of business, and the Bitcoin network will not be able to maintain the 180 TWh of consumption that it currently needs. It is its Achilles heel, for being so wasteful and inefficient at the level of consumption.

We are reaching price levels where things get tough for minersexplains Vries.Where you’re not only limiting your options to grow more, but it’s really going to be affecting day-to-day operations“.

Does that mean Bitcoin is crashing? Not for the moment. It would be necessary for the price to remain below that “freezing point” for several weeks, for the danger to be real. And even with less power and fewer nodes on the network, Bitcoin could continue to operate, albeit slower.

It was an unthinkable scenario just six months ago, so nobody is sure of anything. But as long as the invasion of Ukraine continues and the crisis of raw materials and fuels is not resolved, the outlook is going to be complicated for cryptocurrencies.

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