The Bitcoin hash rate has plummeted – what does this mean?

Weekly News

Another week down where the price of Bitcoin remains fairly quiet and boring. All we can say is enjoy this time, because Bitcoin doesn’t stay quiet for long.

It has been quite surprising that the price has remained above $30,000 with the current situation in China. We will dive into this further down.

Some of the other news items for the week are:

1. South African brothers disappear with ‘Billions’ in Bitcoin

News broke last week Wednesday of a ‘crypto-duo’ that seemed to have disappeared with $3.6 Billion in Bitcoin and other Crypto. 

Africrypt seems to have run away with ~69,000 Bitcoin, which is close to an international record.

The firm’s investigation found Africrypt’s pooled funds were transferred from its South African accounts and client wallets, and the coins went through tumblers and mixers — or to other large pools of bitcoin — to make them essentially untraceable.” – Bloomberg

This news quickly became international as this could be one of the biggest crypto scams ever (amongst many, many others). 

We at Bitvice have seen these scams happen over and over again, where central entities get investments from speculators and hold on to their investment by custodying their Bitcoin (or whatever Shitcoin they came up with). That is why we strive for everyone to self-custody their Bitcoin and understand how to secure it for themselves, over the long-term.

What was very surprising to us is how a central, fairly-unknown South African ‘investment’ entity got so much money under its ownership.

We were extremely sceptic of this, as we are well aware of all big crypto providers in the market, due to our extensive network. 

However, we had never heard of Africrypt and when looking at their Facebook page – they only have a few dozen followers. 

It is very hard to believe that this entity had so much volume under its belt and the news that is trickling through confirms that the amount that was stolen seems to have been ‘overestimated’. 

Nonetheless, the two things that come out of this story is:

  1. Don’t believe everything in the news when it comes to Bitcoin. This is a hot topic and many journalists use any narrative possible for clickbait.
  2. Don’t trust your Bitcoin with other people. Trust yourself, and yourself only. Self-custody your Bitcoin always.

If you want to learn more about Bitcoin and follow respected members of the community for Bitcoin-related news, we suggest following these people:

Macroeconomics:
Preston Pysh
Lyn Alden
Saifedean Ammous

Bitcoin technology:
Adam Back
Marty Bent
Matt O’Dell
Stephan Livera
Nakamoto Institute
Andreas Antonopoulos

Bitcoin ideology:
Alex Gladstein
Peter McCormack

2. Transferring Bitcoin ‘offshore’ is a crime

Further to the South Africa’s Intergovernmental Fintech Working Group’s document that was released earlier this month, there are quite a lot of articles being published that are once again ‘clickbait’.

An article was recently released that confirms it is ‘illegal’ to transfer your Bitcoin ‘overseas’. 

As journalism’s entropic journey continues, it is no surprise that the article had no links or sources confirmed. 

After looking through the SA IFWG forums, there seems to have been no recent updates. We can only assume that the document noted above was used as context to this article. 

If that is the case, it is absolutely legal to transfer your Bitcoin wherever you want. 

However, the narrative around this is extremely worrying. 

First of all, Bitcoin is inherently global and is everywhere at any given time. Your Bitcoin is essentially on the blockchain which is globalised and all you have in your wallet are the keys to access this Bitcoin. How can it be illegal to move something ‘overseas’, when it is in this state in the first place?

Secondly, in terms of the IFWG’s recommendations, this might become a reality for central exchanges. Meaning, if your Bitcoin is held in a domestic exchange or with a domestic intermediary, they could prevent you from moving it to an international exchange. 

If you self-custody your Bitcoin, no one can tell you what you can do with it. It’s that simple. 

3. Mexico’s third richest man will hold Bitcoin for 30 years, believes all Fiat currencies are a fraud

Let’s move on to some brighter news. 

Mexico’s third richest man, Ricardo Salinas Pliego, who is worth a whopping $15.6 Billion – said in a video that all fiat currencies are ‘a fraud’. 

In the short video, Ricardo says that the only thing he would buy and hold for 30 years would be Bitcoin, as it is the only thing that makes sense. 

The Billionaire has also confirmed that 10% of his portfolio is now in Bitcoin. 

He seems to have received widespread applause from the Bitcoin community, but quite a bit of criticism from others. We really enjoyed his take on one of his critics:

The same goes for Bitcoin. The journey of HODLing Bitcoin is not an easy one. It is a game of patience, belief, fortitude and education. 

Every 4-years, Bitcoiners have been in the news for being ‘lucky’ at getting rich. Those who hold through a standard 4-year cycle, come to understand that it is not an easy journey. But, with a low time-preference and sticking to a game plan – there is no need for luck.

A new record for the Bitcoin hash rate

As we said in last week’s newsletter, there have been massive developments in China as the government forcefully shut down Bitcoin mining operations in Sichuan.

We have been looking closely at what is transpiring in the mining industry and many miners have already moved to Kazakhstan and the USA. 

This could end up being ‘China’s $1 Trillion mistake.’

What has also happened is that the Difficulty Adjustment on Bitcoin’s network is set to drop the most it ever has in its history, at the end of this month.

This sounds quite alarming right? Well, initially – yes, it was quite alarming. It was alarming to those focused on the price of Bitcoin as historics have shown that the Bitcoin price tends to follow the hash rate. 

It would be plausible to think that there might have been and will be extensive miner selling pressure as these miners do hold significant liquidity and would need to sell for their short-term costs of moving, setting-up etc.

As the graph above shows, the hash power has declined in the short term with the price being fairly correlated. 

Many would say this has been one of the biggest tests that Bitcoin has ever faced. We tend to agree on this. Imagine what would happen to a network, if 40-50% of its security and power were to be immediately taken away? Many would implode into themselves. 

Bitcoin, however, has carried on confirming transactions at a fairly stable rate and the mempool of all transactions was even cleared this weekend! This only shows the utter resiliency of Bitcoin and once again, it has passed a massive barrier. Every test it faces, only makes it stronger. 

Currently, the hash rate has dropped towards levels last seen in 2019 and as of Monday, 28 July – the difficulty adjustment is set to drop by around 25% on 1 July. 

Miners that are still running around the world are about to have a field day when the adjustment kicks in, as it will be much easier to ‘solve the puzzle’, mine blocks and earn the block reward. 

Once the chinese miners are back in action – we assure you they will be – the hash rate will increase, the difficulty adjustment will increase and the growth in hash rate will continue to rise. It’s only a matter of time. 

In the long-term, China has helped Bitcoin move forward in so many ways. By shutting down mining in Sichuan, it has effectively removed the last area of centralisation that Bitcoin has left. Bitcoin’s mining was centralised in China over many years. What we are seeing now is the tangible decentralization of Bitcoin’s hash power, in line with its distributed validation nodes worldwide. This will bring an exponential increase in robustness to the network and to the security of all our Bitcoin. 

In summary, it is really surprising that Bitcoin has held above $30,000 whilst all of this has played out. It only increases the probability that this could be the local bottom in price as selling pressure becomes more and more exhausted. Please also remember that Bitcoin will always surprise those who speculate and the price could be a lagging indicator to the hash rate – only time will tell. 

That is why we always suggest to new Bitcoiners that they simply do Dollar Cost Averaging – and to avoid trying to time the market. 

The below graph shows the returns on initial total investment, if one were to DCA daily, weekly, fortnightly or monthly over certain periods. 

Once again, patience, low time-preference and belief is all that is needed over the long-term.

Bitvice Podcasts and Media

In last weeks’ podcast we chatted to Hermann Vivier about personal responsibility, addiction, community-driven projects and surprise, surprise – Bitcoin. 

This week, we’ll be chatting to another Bitcoin maximalist about his plans to write a book that will help educate South Africans about the fundamentals of Bitcoin. 

We’ve got an exciting list of other interviews lined up over the next month – so please keep watching and listening!

You can follow our discussions on YouTube or via our podcast on Spotify, Google Podcasts or Apple Podcasts. If you are listening on a different podcast app, here is our RSS feed.

New Website and Knowledge Base

We have been working on a new website in the background which will be released in the very near future!

We have also worked on an extensive knowledge base that explains Bitcoin, Bitvice, Wallets, Self-Custody and a plethora of other frequently asked questions. 

We have also launched a new page whenever you share your referral link, from the top-right of your dashboard. Whenever you share a link, the referred person will land on a new page that explains what Bitvice is. When they are ready to sign up, your referral code will be logged and you will earn 0.25% of every order going forward in referral fees, paid in Bitcoin.

We hope you keep Stacking those Sats!

Brandon van Niekerk

Co-Founder of Bitvice & ICT Project Manager (PMP) who has worked with dozens of international institutions and teams such as Barclays, Standard Chartered etc. Agile practitioner. Product Owner who has owned numerous fintech products and their development. Motivated problem-solver and consistent communicator. Specialist in Banking, Institutional & Enterprise software development and integrations. Gregarious, passionate about working with others and always looking to make the best out of any situation.

Recommended Articles

Leave a Reply

Your email address will not be published. Required fields are marked *