Bitcoin mining profitability falls to a nearly two-year low as Saylor expects the price to return to the ATH in November

The arrival of Cardano’s belated upgrade Vasil, a week after the widely publicized mainnet transition from Ethereum to PoS consensus, was arguably this week’s biggest headline event in the blockchain space. The two milestones uniquely advance the respective networks. However, both saw their impact on the market muted by a wave of multiple bearish macro events.

“Ethereum merger leading to downside teaches us a valuable lesson. The global macro environment replaces everything. If global markets were generally bullish, the merger would have resulted in a pump. But it didn’t. This also applies to Bitcoin,” noted market analyst Kevin Svenson.

Bitcoin also delivered its fair share of developments this week, including a plunge in BTC prices to their lowest levels since mid-June. Here’s more you missed about Bitcoin:

Bitcoin mining profitability slips to October 2020 levels as difficulties hit new highs

Bitcoin mining difficulty and profitability numbers have been flashing extreme signals in September, with the former recently hitting a new high amid the bearish crypto market. Several factors have frustrated bitcoin bulls this year, but in a sign of relief, bitcoin mining difficulties recently surged to an all-time high. This metric, which defines the complexity of the work a miner would need to do to verify transactions or mine tokens on the blockchain, hit 32.05 trillion hashes starting at block 753,984 on Sept. 13, according to BTC.com data.

Bitcoin Difficulty Chart

The mining difficulty, which changes roughly every two weeks for Bitcoin, reset the previous peak of 31.25 trillion hashes, gains of which were largely wiped out by power problems due to the extreme summer heat. The heatwaves have subsided since then, and public miners have also added more rigs to boost their hashing power. The recent increase in mining difficulty, calculated at 3.45%, represents the fourth consecutive increase in hashrate. This includes a 9.26% increase in the two weeks ended August 31, 0.63% on August 18 August and +1.74% on August 4th.

A sustained spike in mining difficulties could inspire Bitcoin to rally and breach the $20,000 mark, where it has consistently suffered rejections. Companies like bitcoin-focused fintech River are funding the optimism as the company recently announced it would acquire 3,000 more ASIC miners, in contrast to others that have ceased operations. The systems are operated with renewable energy.

Bitcoin Mining Profitability vs Hashrate Chart

BitInfoCharts data also shows Bitcoin mining profitability hovering around the lowest level in nearly two years. The daily profitability estimate fell to $0.0678/day for 1 THash/s on Sep 19 and $0.0696 on Sep 22, coinciding with a two-week peak rate of 262 Ehash/s on Sep 18. Notably, the last time profitability dropped below $0.068/day for 1 THash/s was mid-October 2020.

MicroStrategy adds 301 BTC after announcing plans to sell up to $500 million worth of shares

Software and cloud-based services provider MicroStrategy has positively impacted the declining market by adding more bitcoin to its holdings. According to an official filing with the SEC reported on Tuesday, the company added 301 bitcoins, which were purchased at an average price of about $19,851, for a total of about $6 million. The purchases were completed over a seven-week period between August and mid-September.

The recent purchase leaves MicroStrategy (and its subsidiaries) portfolio with well over 130,000 BTC, which it bought for a net price of $3.98 billion including expenses and fees. This equates to roughly $30,639 per coin, which compared to current market prices shows that the company’s strategy is to lose well over $10,000 per coin.

The story of a bold bet

The 301 BTC purchase comes barely a week after MicroStrategy announced plans to sell up to $500 million worth of Class A common stock to buy more Bitcoin. Last Friday, Bitcoin’s largest corporate owner filed with the US Securities and Exchange Commission, announcing that it had hired the services of two global investment firms, BTIG and Cowen, as agents to help it sell its shares in the company. In addition to covering expenses related to general corporate responsibilities, MicroStrategy said in the filing that it would use a portion of the proceeds to buy more bitcoin.

The company hasn’t explicitly stated the amount of bitcoin holdings it intends to acquire or given a specific date for the sales. However, the filing hinted that any proceeds could be used to purchase additional bitcoin. In addition, MicroStrategy will continue to monitor the market to determine if funding for the acquisitions is feasible. Last month, Saylor and MicroStrategy were indicted by the Washington DC Attorney General on allegations of tax fraud.

The recent BTC acquisition shows that MicroStrategy is firmly on the path to becoming a crypto proxy, despite the resignation of co-founder and Bitcoin protagonist Michael Saylor as CEO. Since MicroStrategy began acquiring crypto in 2020, it has accumulated 129,699 tokens worth over $2.8 billion in the current market. This massive size has meant stock performance is tied to Bitcoin’s price and has suffered equally during the recent crypto downturn.

Saylor believes Bitcoin will return to November highs in four years

Prior to Saylor’s resignation as CEO, MicroStrategy had recorded a $918 million loss in its token holdings, inflated in particular by the depreciation of the Bitcoin strategy. It will take MicroStrategy some effort before it can catch its breath and regain the more than $1.5 billion it has lost in value since the Bitcoin Initiative started in 2020.

The chief executive remains confident in Bitcoin’s recovery, recently predicting that the asset will return to its November highs in less than four years. Over the long term, Saylor expects the asset’s value to rise significantly to $500,000 over the next decade if it catches up with gold in terms of market cap. In an interview at MarketWatch’s The Best New Ideas in Money Festival, Bitcoin Maxi revealed that the company is working on secure Lightning wallets for businesses.

Substantiating his prediction, he explained that Bitcoin appears to have bottomed after its four-year moving average of around $20,000. Saylor, whose personal portfolio is 17,732 BTC, noted that Bitcoin has bounced around that mark multiple times, making it a “stable” base.

To learn more, visit our Investing in Bitcoin guide.

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