Getting into Bitcoin? The cryptocurrency may be seeing increased interest with U.S. elections on the horizon. However, understanding the basics of Bitcoin mining represents an important first step when studying the broader Bitcoin ecosystem. Indeed, understanding the “floor hashprice” could help investors prepare for a Bitcoin bump, especially as the election looms.
See more: The 2024 Election, Bitcoin & BRRR
According to analysis and research from CoinShares, the Bitcoin network hashrate, or the total hashing power of all miners, and the rewards per block constitute two important factors of Bitcoin economics. By combining those factors, market watchers can ascertain the “hashprice,” or the “dollar value of each hash in the Bitcoin network.”
The hashprice drops when the network hashrate grows, while it rises when the price rises. The analysis suggests that the Bitcoin halving earlier this year culled many of the less profitable miners, boosting the prospects of those miners still in the game. Following that back-and-forth, the price has found a floor of around $40, per CoinShares research.
“If the bitcoin price rebounds, miners are likely to enjoy a short period of high profits until the network adjusts again, likely correcting the hashprice to current levels,” the firm’s Bi-Weekly Digest reported this week.
In the longer term, that “floor hashprice” of $40 could buoy Bitcoin mining companies. As firms increase their profitability, their durability has also been increasing. Downward pressure on electricity costs has helped. At the same time, sale of waste heat, for example, has allowed Bitcoin miners to diversify their revenues.
An ETF like the Valkyrie Bitcoin Miners ETF (WGMI ) could present one option for investing in Bitcoin mining. WGMI actively invests in Bitcoin miners for a 75 basis point (bps) fee. Set to hit its three-year ETF milestone in February, the fund invests in firms with at least 50% revenue from mining Bitcoin.
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