Positive news for Bitcoin, despite the collapses

Despite the fact that yet another crypto market crash occurred in 2022, there is positive news for Bitcoin. 

It is worth mentioning that all the negative news that triggered the crashes in May, June, and November was not about Bitcoin at all. Nothing serious or heavily negative happened to Bitcoin during 2022; it just suffered from the difficulties of the crypto markets. 

In other words, there is not, and has not been, any negative news regarding Bitcoin that has negatively affected its price in this bear market. 

The only problem related to Bitcoin was the bursting of the 2021 speculative bubble, which, however, had occurred between the end of the year and the beginning of 2022. Instead, since the collapse in May, all the problems have come from sources outside Bitcoin. 

In fact, news concerning Bitcoin exclusively continues to be positive. 

Bitcoin news: mining

For example, a few days ago Bitcoin set a new all-time record. 

It is the one related to difficulty, which rose to almost 37T. 

Actually, the recent increase was insignificant but enough to set a new record. It has now been since late October that the difficulty has been close to 37T. 

For example, in May it was at 28T, while in June it had dropped to 27T. Whereas at the beginning of the year it was at 24T. 

The difficulty, as the name implies, is the difficulty imposed on miners to succeed in finding the hash that confirms individual blocks. The higher it is, the more it means that the miners are competing by using more computing power. 

Variations in difficulty serve to keep the block time around 10 minutes, so it increases as miners use more hashrate, and vice versa.

By now, since early October, Bitcoin’s hashrate is at all-time highs, which implies that difficulty must be as well. It is worth noting that the November price collapse in no way caused the hashrate to collapse as well; instead, it remains at an all-time high. 

Something like this also happened in May, during the collapse of the price of BTC due to the implosion of the Terra/Luna ecosystem, while instead in June the hashrate somewhat decreased. 

The mayor of New York City

New York City’s new mayor, Eric Adams, is a supporter of Bitcoin and crypto markets because he would like New York to become the world’s leading financial center for this asset class as well. 

During a recent interview, he explicitly stated that he believes this sector has ups and downs, and is nonetheless “coming” whether we like it or not. 

NYC Mayor: Crypto is coming if we like it or not, all of these industries have ups and down pic.twitter.com/MM3ex8koOH

— Blockworks (@Blockworks_) November 22, 2022

He confirmed the city’s commitment to trying to take advantage of these new technologies, pointing out that other markets also often have ups and downs. 

He also stated that he believes in new markets and new currencies, and that he does not believe at all that the crypto sector is destined to disappear. 

New York is by far one of the most important marketplaces in the world for crypto markets, although the FTX fiasco certainly had a significant bearing on cooling enthusiasm for this sector. 

Retail investors on Bitcoin news

While it does not seem at all like Bitcoin’s protocol is doing so badly in 2022, it is investors who are not doing so well. 

According to the estimate of a recent Bank for International Settlements (BIS) report, titled “Crypto trading and Bitcoin prices: evidence from a new database of retail adoption,” between 73% and 81% of cryptocurrency investors are likely to have lost money. 

The analysis shows that Bitcoin price increases are linked to greater entry into crypto markets by retail investors. In fact it would appear that users make active use of crypto exchange apps in the months following Bitcoin price increases. 

In other words, it is possible that it is the price increases that spur retail investors to take action, which could mean that they tend to buy after the price has risen. 

These are particularly young men with a higher tolerance for risk than women and older users. They are also predominantly Android smartphone users. 

This leads BIS analysts to conclude that, in general, investors see cryptocurrencies as a speculative investment (or even a bet), rather than an actual means of payment. 

However, again, these are not problems inherent in the Bitcoin protocol, or having to do with its use, but related instead to people’s behavior, which is often more emotional than rational. 

Institutional investors 

Large investors often referred to generically as “institutional,” behave differently, however. 

For example, whales have already been accumulating ETH for a few days, and Cathie Wood‘s ARK Invest these days is increasing its exposure to GBTC.

GBTC is the Grayscale Bitcoin Trust, which is Grayscale‘s fund that invests in Bitcoin. 

In theory, GBTC’s market price performance should replicate that of BTC, and instead, GBTC has been performing much worse than BTC for almost two years now. 

Indeed, in recent days its discount to NAV has risen to 45%, making it an all-time high. It now hovers around 42%, which remains a rather high discount level. 

While on the one hand with GBTC’s market value being much lower than that of the BTC they hold as collateral, this anomaly could be due to the fear that Grayscale may go bankrupt, on the other hand, being a problem that began to form as far back as March last year, it seems that the main reasons are other. 

It is trivially possible that GBTC is suffering from competition from alternative but much more competitive financial products, such as the ETFs launched on the Canadian market and which have been very successful. 

In this case too, these are not problems related to the Bitcoin protocol, or to the BTC financial asset, but to private companies operating in the crypto markets. 

Baron Rothschild once said: 

“Buy when there’s blood in the streets, even if the blood is your own.” 

It seems that large investors are following the baron’s advice, while retail investors are doing the exact opposite.