$BTC prices continue to drop, and that affects mining companies. However, could they be a safer way to play crypto for industry bulls right now?
Bitcoin has dropped below its
However, it's not all doom and gloom, most Bitcoin experts have projected this kind of volatility and with macro market news such as the Ukrainian crisis and looming Fed hikes, it's no wonder $BTC prices are dropping. The only thing doing well on the market today are commodities such as oil and gold. Still, crypto mining companies may actually be better investments than their physical mining counterparts.
HOW BITCOIN MINING WORKS
Bitcoin mining at its most basic is when computers check and validate a block of transactions that then get added to the blockchain. When a block is completed miners receive a 'reward.'
It's not as simple as it sounds, however, 'validating a block' means solving complex mathematical problems which require sophisticated ultra-fast computers that are expensive and use a ton of power.
More miners joining the network adds to the difficulty of mining, and thereby the cost.
THE CASE FOR BITCOIN MINERS
Institutional investors, who have restrictions on their ability to invest in cryptocurrencies, instead buy shares of listed crypto miners or ETFs that track miners as a way to play the industry. As long as there are longs in Bitcoin, mining companies will still benefit from this investment.
Experienced investors who understand the dynamics of the market understand that when everyone is selling, eventually there are major discounts to take advantage of. It's called "shaking the weak hands." It's generally a way the rich get richer.
On that same 'token' many new mining outfits may not be able to survive these tighter profit margins, and eventually by squeezing them out, the established farms will take a larger market share. If BTC prices come back this will boost profits at a rapid pace for miners with a large market share.
WAYS TO BUY THE DIP
Some of the more established names in mining are over 50% off their highs.
Other established players to radar include
ONE WAY TO PLAY THE DIP NOW
MWWC may be one of the only options in the bitcoin mining space that requires immediate attention.
THE CASE FOR A BITCOIN BOUNCE
At the end of the day, the Bitcoin blockchain was created anonymously with a final limit of 21 million coins, of which nearly 19 million have already been minted.
BTC is a finite resource, even if it's fungible. BTC bulls should back miners in the near term.
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