Bitcoin (BTC) has risen to $5,480 at time of writing, after flirting with $3,850 and suffering heavy losses on Thursday. But the leading cryptocurrency, after rebounding 23.5% to $5,990 on Friday, also fell once again below $5,000.
The global digital asset is on a roller coaster ride, rising and falling right around $5,000, according to data compiled by CoinMarketCap. The heavy volatility is putting major pressure on miners powering the network who will have to decide if their operations are still profitable. Moving forward, they might capitulate and go bankrupt or continue to power the network – just as the Bitcoin halving approaches in May, an event expressly designed to slash their BTC rewards by half.
Miners usually sell off some of their Bitcoin earnings to cover operating costs. Their financial troubles, generated by the fall of Bitcoin’s price, could trigger more selling and put even more pressure on the price.
Bitcoin needs miners to secure the network but miners find themselves in a challenging zone as BTC trades between $7,400 and $4,500.
Chris Bendiksen, head of research at CoinShares, says Bitcoin’s price should be around $7,400 for a miner to profit. Falling below $4,500 puts miners in the red. Most will wait to shutter while hoping for a rally, but if that doesn’t happen around the time of the halving, they’ll be forced to.
Steve Barbour, owner of Upstream, tells Bloomberg,
“The price has dropped, the halving is coming. If the price doesn’t recover, it’s a double whammy on revenues.”
Crypto analyst and veteran Wall Street trader Tone Vays expects miners to suffer but says the network will continue to thrive as a decentralized platform for peer-to-peer transactions.
“Sure, a lot of miners are going to take a hit and a lot of miners are going to go bankrupt but that does not mean that Bitcoin is going to get centralized, even if mining gets centralized for a short period of time. Who cares.”
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Featured Image: Shutterstock/PHOTOCREO Michal Bednarek