Bitcoin short-term investors should know this before exiting

by James · August 9, 2022

Bitcoin, the largest cryptocurrency, holds on to two main catalysts for support. Mainly mining activity and transaction requirements via the Lightning network. But it seems like the former took a big hit while the latter continues to help the network reach new heights.

Here is the analogy

Bitcoin miners have experienced a trap in the crypto market due to the recent crypto crash. Now with Bitcoin prices plunging in 2022, underwater miners are forced to sell into a declining market environment.

One should know that Bitcoin mining is energy intensive and stable load that can be quickly adjusted up or down with extreme precision at no extra cost.

These factors make it an unrivaled option for stabilizing electrical grids through demand response. Well, in this case, things turned south, at least for BTC enthusiasts, and not the company in the spotlight.

In July, a Texas Bitcoin miner earned more shutting down machines than mining Bitcoin.

Sounds strange right? But it is actually true.

Riot Blockchain generated $9.5 million worth of power credits in July, significantly more than their Bitcoin production this month of 318 BTC, worth $6.9 million.

Source: Exciting research

Here’s how it made sense – To earn those power credits, Riot restricted 8,468 MWh in July, earned 1,122 dollars per MWh reduced. according to chirping,

“If they had directed this energy to mine bitcoin instead, they would have only made about $140 per MWh, giving them a strong financial incentive to reduce production.”

But the question is – with market recovery on the horizon, should miners play the waiting game?

In the latest sign of miners recovering from recent price weakness, the amount of BTC in their wallets has hit a new multi-year high.

Between July 6, when reserves hit a local low, and the peak on July 29, miners’ wallet balances increased by 0.37% or 6,885 BTC.

Source: CryptoQuant

CryptoQuant contributor and analyst Jan Wuestenfeld shared this development in a graphical analysis above.

Greener spot here

Moving on to a bullish narrative, BTC’s renowned scaling transaction system (LN) showed growth. According to Arcane Research’s report, the flagship network recorded incredible growth seen by the Blocks Cash App that integrated the Lightning Network. Thus allowing the US users to send Bitcoin for free to anyone worldwide.

The graph below showed the number of users accessing Lightning payments between August 2021 and March 2022.

Source: Arcane Research

In terms of growth, the user base went from just 100,000 users to over 80 million potential users in a matter of months. Even now it continues to flourish.