A recent article suggested that mining rewards could form an early warning signal for market action: https://www.forbes.com/sites/investor/2018/06/26/bitcoin-watch-out-below/#58046c0363a2.

The author writes, ‘I look at the rewards for the powerful 1080ti Nvidia card to get my guide. Right now it has fallen off the charts. A few weeks back and the card would excavate $3.50 of bitcoin-equivalent altcoins but right now you are lucky to dig $1.50. This is a flashing warning to me as the drop in mining rewards has been faster than the drop in bitcoin’s dollar price and is at the lowest end of the range in the last year. Bitcoin is on the ledge of another heavy fall that I am expecting this summer to bring the price down to a low from where it bottoms.’

There is a long and tortuous debate about the relationship between hashrate and price, but this analysis suggests that falling mining rewards are a red flag for further drops. In one sense that’s understandable, since new hashrate will lag price action – simply, miners who order new hardware as they see bitcoin spiking have to wait a while before it ships. Hashrate will continue to rise even after a price peak. So this article might simply be noting the fact that hashrate and price follow each other, just out of sync by a few weeks.

But miners do far more than maintain the network. As some of the most active members of the bitcoin ecosystem, they have a keen interest in bitcoin’s price. As Waves CEO Sasha Ivanov recently wrote on Telegram, ‘People who ask the eternal question “what are cryptocurrencies backed with” don’t realize that they are backed better than many national currencies. If it were not for the miners BTC could go down to sub 1000 levels right now, now we’re in the same situation that was in Spring 2015, when mining was just on the verge of profitability, and basically it was miners who did not allow BTC price go lower. So god bless the miners, despite I’m sure we won’t see any hardware based mining in 5-10 years.’

Miners control crypto supply in more ways than one. They create coins, but they also decide whether coins hit exchanges. They are the decentral bank of bitcoin – and they play an important role in setting the price of BTC.

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