I think from my observational point Rick, that this is a whole lot deeper than first recognised.
It used to be just rumours that Bitmain – the world’s largest manufacturer of Bitcoin mining equipment - was in serious difficulty, which may have forced them to fire sell their Bitcoin holdings to meet their obligations. They could not sell their ‘Bitcoin Cash’ holdings as the market is not remotely liquid enough (Bitmain are rumoured to own >1million $BCH).
These rumours have clearly now moved closer to the truth arena as we learn that Bitmain is closing its Israeli research and development centre in Ra’anana just 2 years after it was founded there and four months after it was alleged to be expanding in the market and hiring a large number of Blockchain and software engineers . Paradoxically just a few days prior to announcing this Israel-based closure they opened a new data centre, at a cost of $20 million, in the United States.
The question is now whether or not the market needs full Bitcoin ‘capitulation’ before rebuilding strength. Certainly, altcoins like Ethereum have arguably had their capitulation events already.
We know that High Net Worth Individuals (HNWI’s), family offices and now institutions are accumulating. For example, and as you have mentioned above, Grayscale in the US has seen >$300million of net inflows into its crypto trusts this year… the majority being from institutional investors.
These investors are unlikely to capitulate vs the retail investors that bought at the end of 2017.
Let’s not forget that it was just two weeks ago Jeff Sprecher, chairman of the New York Stock Exchange, said that bitcoin and other digital assets are here to stay.. Which either conjures up pictures of him as the Emperor Nero fiddling while Rome burns or a modern day soothsayer - take your pick!
The current low prices ~$3600 are actually below many miners’ break-even costs. As a result, some have already been forced to turn off part or all of their mining hardware. This has caused Bitcoin’s mining “difficulty” to drop (an indication that there are less machines being used to keep Bitcoin secure).
Bitcoin peaked at just over 50 ‘exahashes’ in mining power. This has now dropped to ~40. This is still 4x the hashpower/security seen at the end of 2017.
In layman’s terms, this means 40,000,000,000,000,000,000 calculations per second are done to find the solution to secure a ‘block’ on Bitcoin’s blockchain. On average, it takes 10 minutes to find the answer (so 10 x 60 x 4018 calculations!). In order to take over the blockchain, an attacker would need >50% of this hashpower.
As an aside here, if nothing else we are seeing this change in the market sifting out some wheat from the chaff in some of the less diligent tech-based start ups that were trying to make a killing.
Given the macro environment (a clear trend of large financial firms preparing to serve institutional investors) and the fact we are now below the cost of mining for some of the mining companies, the price drop likely poses more of a medium-term opportunity than a problem for investors with strong hands.
If I were to offer advice here it would be to adopt averaging in rather than trying to time an investment perfectly.