After a long crypto winter, Bitcoin BTC miners and average investors are now back in the black, according to a report today from blockchain intelligence firm Glassnode.
Bitcoin rallied over the weekend and is now trading above $20,000 for the first time since Sam Bankman-Fried’s dramatic FTX crash. This means that it is profitable again for mining companies to use the expensive hardware needed to operate the Bitcoin network. This also means that your average Bitcoin hodlerif they sold their stock now, they would no longer be selling at a loss.
Glassnode estimates Bitcoin’s “realized price”, the average price current investors have paid for BTC, to be around $19,700. The average price at which Bitcoin has traded over the 155 days is $18,000, Glassnode explains. Either way, Bitcoin is now trading well above that mark, changing hands today at $21,000.
The rally means miners are also getting some relief, the analytics firm notes. Bitcoin mining is the use of computing power to solve the complex mathematical equations needed to create new bitcoins. According to Glassnode, it currently costs around $18,800 to mine Bitcoin. With Bitcoin now trading above $20,000, it means the average mining business can once again operate while making a profit.
The price of Bitcoin surged last week following news that inflation rates in the United States had started to decline. Throughout 2022, the Federal Reserve has raised its benchmark rate to stifle record inflation in the United States, driving down risky assets across the board, including stocks and Bitcoin.
The Fed last raised interest rates in December by 50 basis points—a more modest increase compared to several increases of 75 basis points throughout the year. The Bureau of Labor and Statistics said in its Consumer Price Index report on Thursday that inflation measured in December fell to 6.5% from 7.1% measured in November. This appears to have helped investors gain confidence that the Fed might be on the right track to ease its hawkish monetary policy.
Rate hikes throughout 2022 have contributed to a brutal crypto bear market. And as the price of Bitcoin fell, many overleveraged companies went bankrupt, including Celsius, Voyager, and Three Arrows Capital.
By far the biggest meltdown came in November when the once-dominant FTX imploded following a bank run on the exchange. The cash shortage forced the company to admit that client funds on the platform were not fully secured, freeze withdrawals and eventually file for bankruptcy.
Now, with FTX founder Bankman-Fried charged with eight financial crimes and awaiting trial, and the Fed stepping back, crypto investors may once again have reason to be optimistic.
The views and opinions expressed by the author are for informational purposes only and do not constitute financial, investment or other advice.
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