Neither Bitcoin nor any of the most popular altcoins in the market are the best bets for maximizing returns. Yes, Bitcoin has more than tripled in the last year, and yes, it is expected to do something similar on the next bull run, but it won’t do as much as the backbone of the Bitcoin industry – miners.
Bitcoin price hike exceeded all expectations as the crypto was not far from its ATH of $ 42,000 at the time of going to press. This has clearly sparked institutional interest in BTC as an alternative asset. In fact, many institutes rely on Bitcoin and invest in Bitcoin from as little as 30,000 US dollars. Anyway, the mining industry of Bitcoin is going to explode more than the price of BTC, and here is why.
Bitcoin price against miners
In short, an increase in the price of Bitcoin has a cyclical effect. It starts with the expectation of a higher price, which leads investors with capital into the ecosystem. This drives up the price, leads to good profits and thereby attracts more investors.
However, in order to keep the inflow of new capital going, Bitcoin miners have to mine new blocks. A sudden spike in the price of Bitcoin causes miners to benefit more from it. At this point, miners have more BTCs than the usual, which causes them to hold the coins. The more coins miners hold, the less pressure there is to sell across the industry. This creates a supply bottleneck that drives the price of Bitcoin soaring.
This leads to two causes: it attracts more investors and eventually it attracts more miners to mine Bitcoin, increasing the hashrate and the difficulty to compensate.
Unlike buying Bitcoin, the mining industry isn’t just about the rewards mining earns. It also affects mining manufacturers, chip makers, mining competitors, etc.
Before the curve
Industry leaders like Binance, OKEx, and Huobi have clearly been on the cutting edge since they launched their mining pools in 2020. Not only has this enriched the exchanges right from their foray into mining, it has also provided the mines’ exchange liquidity with BTCs.
Even American companies such as Coinbase, Digital Currency Group, Blackcap, etc. have entered the market directly or indirectly in anticipation of this demand.
While this is one big side of the mining industry, there is another side that offers the facilities needed to keep the ball going – companies that provide the capital or fund them to miners.
So far, Genesis has been the most popular company to do this. More recently, Galaxy Digital founded Galaxy Digital Mining, a development that according to a press release
“Provide trading and risk management solutions, major loan and stock investments, and M&A advisory services to bitcoin miners. In addition to providing financial services to miners, Galaxy Digital Mining will also mine Bitcoin on a proprietary basis. “
Although a complex network of industries work together, mining will be the sector that will see massive improvements and adoption in the years to come.