Are pixie fairies behind Bitcoin's latest bubble?

amycastor.com
7 min read
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Are the pixie fairies sprinkling gold dust on Bitcoin's market again? By the looks of things, you might think so.
Are the pixie fairies sprinkling gold dust on bitcoin's market again? By the looks of things, you might think so.

Like in the bubble days of 2017, the price of bitcoin is headed ever upward. On Wednesday morning, it surpassed $18,000 — a number not seen since December 2017 when bitcoin, at its all-time peak, scratched $20,000.

Of course, the market crashed spectacularly the following year, and retailers lost their shirts. But here we are once again, trying to unravel the mysteries of bitcoin's latest price movements.

Several factors may explain it — Tether, PayPal, and China's crackdown on over-the-counter desks — but before we get into that, let me reiterate how critical it is for bitcoin's price to stay at or above a certain magic number.

Bitcoin miners — those responsible for securing the bitcoin network by "mining" the next block of transactions on the blockchain — need to sell their newly minted bitcoins for real money, so they can pay their massive energy bills.

Roughly $8 million to $10 million in cash gets sucked out of the bitcoin ecosystem this way every day. So, in order for the miners — the majority of whom are in China — to turn a profit, bitcoin needs to be priced accordingly. Otherwise, if too many miners were to decide to call it quits and unplug from the network all at once, that would leave bitcoin vulnerable to attacks. The entire system, and its current $345 billion market cap, literally depends on keeping the miners happy.

Now let's jump to May 11, an important day for bitcoin. That was the day of the "halvening," an event hardwired into bitcoin's code where the block reward gets slashed in half. A halvening occurs once every four years.

Before May 11, miners received 1,800 bitcoin a day in the form of block rewards, which meant they needed to cash in each bitcoin for $5,000. But after the halvening, the network would produce only 900 bitcoins per day, so miners knew they needed to sell each precious bitcoin for at least $10,000.

But…
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