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Mad Hedge Fund Trader

Hash Rate Collapse

Bitcoin Letter

It’s no secret that the price of Bitcoin is directly correlated to a growing hash rate.

These are truly one of the essential indicators of the underlying health of Bitcoin.  

As buy and sell volume increases in the network, mining introduces more liquidity by delivering fresh coins, and the activity increases when more people buy and sell bitcoin.

This unwritten contract keeps supply and demand in check as the steady flow of newly minted coins lurches ever closer to the final tally of 21 million Bitcoin.

However, I never said there wouldn’t be bumps on the road on the way there.

It’s no coincidence that the price of bitcoin has been slowed down because of the exorbitant energy prices around the world.

Higher energy costs are having a ripple effect where crypto mining companies are adversely affecting by a slowing hash rate.

A developing and healthy mining infrastructure is critical to a higher bitcoin price and what I am seeing are short-term bottlenecks that can only be resolved with easing conditions.

What is hash rate?

Hash rate is the measure of computational power used to verify transactions and add blocks in a Proof-of-work (PoW) blockchain. Bitcoin, among others, utilizes mining to mint new coins and verify transactions.

Hash rate can represent the number of individuals or entities in the world participating in the process of mining. Therefore, the more people mining bitcoin, the higher is the hash rate.

Why is hash rate important in mining?

The mining process, which involves miners solving complex computational puzzles to add blocks to the blockchain, leads to a more secure network.

In addition, miners have an incentive to mine for higher prices.

This system of reward ensures that there will always be new coins added to the economy of bitcoin while keeping the integrity of the blockchain network.

Mining is a business and miners can’t successfully mine if expenses are high combined with a low bitcoin price.

Once a miner produces a coin, it’s common to sell that coin back into the marketplace to recoup the costs of running a mining operation.

Higher rewards lead to a virtuous loop of higher prices and higher revenue while the opposite results in a vicious feedback loop that turns into a downward spiral.

The hash rate has decreased by around 5% in the last few months.

The hash rate recovered well from last summer when China banned Bitcoin and miners fled abroad to restart operations.

These are the growing pains in order to stabilize a new asset class.

The infrastructure of a new asset class doesn’t get built in one day and hopefully, the hash rate can shrug off the latest pullback.

Yet we face an upcoming summer with spiking electricity prices across the world as one of the world's largest exporters of fossil fuels, Russia, is enthralled in a military conflict and global energy supply chains are being severed by sanctions.

Unfortunately, Kazakhstan, the 2nd largest Bitcoin mining country, is facing some more short-term squeezes as Kazakh authorities said they seized almost $200 million of equipment from crypto mining operations as they crack down on illicit mines.

Legally operating miners in Kazakhstan had their power cut off at the end of January, as the government grappled with energy shortages.

The withdrawal of capacity from Kazakhstan is currently limiting bitcoin's hash rate growth.

This might feel highly esoteric because these events happen thousands of miles away.

But it matters because Bitcoin is still vulnerable to supply shocks just like the global supply chains are.

Deteriorating hash rates could signal to traders to delay Bitcoin purchases and as Bitcoin is also fighting with other assets for fiat currency, the incremental trader could be inclined to pay for groceries, gas, and housing before they dip back into the crypto market.

If the hash rate starts to tick upwards as we head into the summer, this could be the genesis of a Bitcoin rally.

 

https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png 0 0 Mad Hedge Fund Trader https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png Mad Hedge Fund Trader2022-04-19 13:02:092022-04-19 17:54:15Hash Rate Collapse
Mad Hedge Fund Trader

Quote of the Day - April 19, 2022

Bitcoin Letter

“I would trade all of my technology for an afternoon with Socrates.” – Said Co-Founder of Apple Steve Jobs

 

https://www.madhedgefundtrader.com/wp-content/uploads/2022/04/steve-jobs.png 428 336 Mad Hedge Fund Trader https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png Mad Hedge Fund Trader2022-04-19 13:00:082022-04-19 17:50:11Quote of the Day - April 19, 2022
Mad Hedge Fund Trader

April 14, 2022

Bitcoin Letter

Mad Hedge Bitcoin Letter
April 14, 2022
Fiat Lux

Featured Trade:

(GOING TO THE MOON WITH CRYPTO)
(GME), (AMC), (SAFEMOON)

https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png 0 0 Mad Hedge Fund Trader https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png Mad Hedge Fund Trader2022-04-14 16:04:512022-04-14 16:25:36April 14, 2022
Mad Hedge Fund Trader

Going to the Moon with Crypto

Bitcoin Letter

One pocket of the asset world that has really taken off in the last few years are the meme assets.

Meme assets don’t just pertain to equities like GameStop (GME) and AMC (AMC).

Truth be told, these assets are incredibly speculative and it's frequent when stock prices don’t mesh nicely with the cash flow or PE multiple.

Crypto also has meme coins which can border on the edge of insanity to the edge of speculation.

These types of bets are for the strong-willed.

Enter SafeMoon.

Coined after the phrase that profits are “going to the moon”, yes, I kid you not, this meme coin has been drumming up quite a following on social media where many of these speculative ideas incubate.

What Is SafeMoon?

SafeMoon is a cryptocurrency token that launched in early 2021, using blockchain technology developed by Binance.

A feature unique to SafeMoon is that it charges a 10% fee whenever you sell the token, well, that was until an upgrade reduced this fee to 2%.

The high fee is explained as a fee that discourages selling, but I would argue that it creates more of a centralized feel to this meme coin and kills liquidity in a marginal coin.

Anybody knows that without ample liquidity, markets can dry up and become untradeable.

In fact, many retail traders I hear from refrain from going too deep into speculative crypto territory for fear that they won’t be able to fill an order upon exit.

For the developers of SafeMoon to force participants into high transaction fees screams scarcity mentality to me instead of focusing on creating a high-quality coin.

This ploy also breeds distrust in the incremental investor who won’t jump off the fence and into SafeMoon if they know they can’t cut losses easily.

SafeMoon takes the proceeds of all sales fees and gives 50% to current token holders in a distribution that is called a “reflection.” The other half of the fee goes into a liquidity pool that SafeMoon uses to maintain price stability.

Rerouting proceeds to existing coin holders are poor practice and a big red flag.

This practice, again, encourages the centralization of the coin which is in fact what many coin holders hate.

The structure is set up to reward only existing participants and clearly, the ones that gain the most are the founders and developers who have skin in the game from the start.

This doesn’t sound too fair to me.

I also noticed that since much of the SafeMoon community is based on social media platforms, members who decide to sell some of their coins are prone to harassment from other members of the social media groups.

Vilifying others for selling an asset is another large red flag.

In the world of buy low and sell high, sometimes traders must take profits, and to frame the selling of one SafeMoon coin as sabotaging the asset speaks volumes about who is involved in this.

I am not interested in being cyber stalked by an unruly SafeMoon mob and most others aren’t as well.

Such a poor mentality would in fact turn off many incremental buyers from pulling the trigger.

SafeMoon does not have any other special use case besides being a store of value. It doesn’t facilitate any automated contracts or decentralized applications, like Ethereum.

Another massive problem with SafeMoon is the challenge of simply investing in it.

Investors cannot buy SafeMoon with the US dollar or any other fiat currency.

The only way to pay for purchases of SafeMoon is with other cryptocurrencies.

To buy it, one must need to buy a coin on an exchange that supports SafeMoon, then use that other coin to buy into SafeMoon.

Ease of transaction is something SafeMoon glamorously fails at.

Another red flag is that no reputable exchanges like CoinBase and Kraken will touch the trading of SafeMoon. It’s also not available on apps like Robinhood or SoFi Invest.

There is no way I could in good faith recommend investing in something so abstract as SafeMoon. I get it that SafeMoon is trying to pour that pixie dust on themselves like Dogecoin, but I have unearthed too many negatives in this coin to ever even consider it aside for a good laugh.

It’s not surprising that the coin has crashed since its debut in 2021.

 

https://www.madhedgefundtrader.com/wp-content/uploads/2022/04/safemoon.png 746 936 Mad Hedge Fund Trader https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png Mad Hedge Fund Trader2022-04-14 16:02:462022-04-14 16:51:04Going to the Moon with Crypto
Mad Hedge Fund Trader

Quote of the Day - April 14, 2022

Bitcoin Letter

“When we first announced it, we had over a million people sign up to use Robinhood Crypto in the first couple of days.” - Said Robinhood Co-Founder Baiju Bhatt

 

https://www.madhedgefundtrader.com/wp-content/uploads/2022/04/baiju-bhatt.png 432 352 Mad Hedge Fund Trader https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png Mad Hedge Fund Trader2022-04-14 16:00:432022-04-14 16:24:23Quote of the Day - April 14, 2022
Mad Hedge Fund Trader

April 12, 2022

Bitcoin Letter

Mad Hedge Bitcoin Letter
April 12, 2022
Fiat Lux

Featured Trade:

(PETER THIEL STICKS IT TO THE INSTITUTIONS)
(BTC), (PYPL), (BLK), (BRK-B)

https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png 0 0 Mad Hedge Fund Trader https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png Mad Hedge Fund Trader2022-04-12 15:04:152022-04-12 16:01:54April 12, 2022
Mad Hedge Fund Trader

Peter Thiel Sticks It To The Institutions

Bitcoin Letter

Bitcoin has many doubters, something so novel usually does.  

Most Baby boomers who have made it big really have no incentive to get rich again, that’s why many aren’t even inclined to listen to its Bitcoin’s pitch.  

To most of the boomer success stories, their financial overperformance was underpinned by the US dollar.

The US dollar isn’t your father’s US dollars.

The destruction of purchasing power has roiled the US dollar and now it has become a target to topple.

Clues are there from Russia desiring to settle energy contracts in Russian Rubles.

Saudi Arabia is in talks to do deals with China in the Chinese yuan.

Unsurprisingly, it’s almost natural that successful Americans born during the peak of the US dollar stick to that as a secret sauce.

For the younger generations, the case is a lot more muddled as billionaire PayPal (PYPL) co-founder Peter Thiel shared his list of enemies stopping bitcoin from rising 100x Thursday while speaking at the Bitcoin 2022 conference in Miami, Florida.

The enemies are “a list of people who I think are stopping bitcoin,” he said. “There’s a lot of them, they tend to have nameless faceless bureaucrat perspectives, which is of course one of the ways they hide.” Thiel continued:

We are going to try to expose them and realize that this is sort of what we have to fight for bitcoin to go up 10x, 100x from here.

“The central banks are going bankrupt. We are at the end of the fiat money regime,” he said.

The first person on the list was Berkshire Hathaway (BRK-B) CEO, Warren Buffett. Thiel put up a picture of Buffett with two of his most famous quotes about bitcoin: “rat poison” and “I don’t own any and I never will.”

It’s fascinating to watch from afar, a war of great minds, and Peter Thiel and Warren Buffett are two heavyweights.

Thiel has had the propensity to behave riskier with his bets which is normal for early-stage tech investors.

He co-founded PayPal, was an early investor in Facebook, and has numerous connections to influential politicians.

Thiel wasn’t talking to the existing Bitcoin base which many are diehards.

He was talking to the incremental investor sitting on the fence.

I understand it’s a leap of faith to jump into a digital currency that produces no cash flow or income.

It’s hard to do mental gymnastics.

Thiel most likely came across as too zealous, painting the dilemma as a binary choice between Bitcoin or fiat currency.

The truth is that both of these can succeed in the future for two entirely different reasons.

They also attract different types of investors which is the beauty of investing.

The next picture he put up was of Blackrock (BLK) CEO Larry Fink, who has been quoted saying Bitcoin is an “index of money laundering” and who also presides over $9 trillion of managed money.

Ostensibly appearing as if this is a binary choice placing the biggest beneficiaries of the fiat monetary system in this generation is more of a dramatic effect if anything else.

The truth is that Blackrock’s Fink is starting to change his tune about Bitcoin and his firm Blackrock is looking into how they can make money for the clients using not only equity funds.

Many of these guys on Thiel’s list have fiduciary responsibilities to their shareholders and throwing $9 trillion at Bitcoin would violate any sort of risk control.

Instead of alienating institutional money, Thiel has chosen an undiplomatic way to call out the corporate money that hasn’t bought into Bitcoin like retail investors.

Bitcoin has stayed very much in the limelight in 2022 and it’s clear that as a $2 trillion industry, it’s not going away.

Ultimately, Bitcoin’s price action has been somewhat disappointing since its surge to $65,000 last year, but that doesn’t mean it is a failure.

Consolidating and digesting a giant gap up is natural.

The technical support at $38,000 has held up nicely, and Thiel’s call to action to take it back to $65,000 won’t move the needle in one day but alerts many billionaires that if they miss this ride up, it might be the biggest missed opportunity of a lifetime.

 

https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png 0 0 Mad Hedge Fund Trader https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png Mad Hedge Fund Trader2022-04-12 15:02:082022-04-12 16:02:02Peter Thiel Sticks It To The Institutions
Mad Hedge Fund Trader

Quote of the Day - April 12, 2022

Bitcoin Letter

“I think anybody who is interested in keeping their money safe from the criminal banking system would want gold, silver, and Bitcoin.” – Said American Broadcaster Max Keiser

 

https://www.madhedgefundtrader.com/wp-content/uploads/2022/03/max-keiser.png 472 394 Mad Hedge Fund Trader https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png Mad Hedge Fund Trader2022-04-12 15:00:012022-04-12 16:00:09Quote of the Day - April 12, 2022
Mad Hedge Fund Trader

April 7, 2022

Bitcoin Letter

Mad Hedge Bitcoin Letter
April 7, 2022
Fiat Lux

Featured Trade:

(JANET PUTS IN A GOOD SHOWING)
(BTC)

https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png 0 0 Mad Hedge Fund Trader https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png Mad Hedge Fund Trader2022-04-07 17:04:332022-04-07 17:36:17April 7, 2022
Mad Hedge Fund Trader

Janet Puts In A Good Showing

Bitcoin Letter

Digital assets climbed the wall of worry surpassing a market cap of $3 trillion only just last November and that is just a small taste of things to come.

It was only at $14 billion just five years before that and sure, it’s retraced somewhat back to around $2 trillion in market cap now, but the proof is in the pudding.

When conditions align yet again in a quantitative easing type of way, expect the price of Bitcoin to take off.

Imagine how well Bitcoin is doing in an aggressive tightening cycle, stubbornly staying over $40,000 per BTC, it has proved its worth as a store of value.

US Treasury Secretary Janet Yellen dived into the topic of cryptocurrency at a speech the other day and much of what she talked about was net positive for the asset.

This will go a long way to legitimizing the digital token because this level of power broker also has the clout and authority to shut down an industry like cryptocurrency.

Yellen referenced the onset of the Internet in the early 1990s as an analogy for crypto, Yellen said while digital assets may be relatively new, they are part of the larger trend of the digitization of finance that has been in the making for decades.

I wouldn’t quite lump in crypto with the rest of digital finance, it’s quite a different animal yet if that is what it takes for her to understand what it is, then more power to her.

Yellen believes the development of digital technology can help create a more efficient payment system with instantaneous transactions and lower costs.

She also mentioned sizing up the risks, not technologies, and I would argue that the risk of not greenlighting crypto at the Federal level means that a country like Russia could forge ahead in crypto development.

What I liked about Yellen was she began to normalize the currency in terms of describing it as the next piece of financial development in a long history of digital progress.

Almost nothing she said felt like she would suddenly make a u-turn and squash the whole process.

She again pulled out the “caution” card which is really a central feature of bureaucrats and ensured the public that there won’t be any snap decisions made any time soon.

I am still not sure if this will be a kick the can down the road type of phenomenon, but she has left that possibility open as well.

What she plans to do is to sit back and allow the technology and the risk levels to emerge then to prove to her whether its ready or not so taking a passive role in this matter also means that the government will treat this as a slow play type of deal.

The last issue she brought up is the systemic risk aspect of cryptocurrency and if this asset could withstand widespread stress.

The Federal government will need to develop certain processes and mechanisms to solve contagion in the markets.

If one firm fails, then surviving a fatal blow to the overarching system is paramount.

Unfortunately, I believe Yellen is not suitable for safeguarding and promoting cryptocurrency.

Although she didn’t do anything overt to shut down the progress of crypto, it seems like she is biding her time in office until someone younger can come in who actually knows a thing or 2 about crypto.

It’s painfully obvious when someone has a scant idea of how crypto functions and Yellen is one of these people.

She simple is a bureaucrat placed in the Federal government at this particular time when crypto is developing wildly and she must answer to it because her position requires her to do so.

Only the real crypto people know what is going on.

The bar has been set naturally low for her and she succeeded.

In the meantime, crypto will keep developing and the price of Bitcoin will grow parallel to the inertia in Washington.

 

https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png 0 0 Mad Hedge Fund Trader https://madhedgefundtrader.com/wp-content/uploads/2019/05/cropped-mad-hedge-logo-transparent-192x192_f9578834168ba24df3eb53916a12c882.png Mad Hedge Fund Trader2022-04-07 17:02:072022-04-07 17:38:51Janet Puts In A Good Showing
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There is a very high degree of risk involved in trading. Past results are not indicative of future returns. MadHedgeFundTrader.com and all individuals affiliated with this site assume no responsibilities for your trading and investment results. The indicators, strategies, columns, articles and all other features are for educational purposes only and should not be construed as investment advice. Information for futures trading observations are obtained from sources believed to be reliable, but we do not warrant its completeness or accuracy, or warrant any results from the use of the information. Your use of the trading observations is entirely at your own risk and it is your sole responsibility to evaluate the accuracy, completeness and usefulness of the information. You must assess the risk of any trade with your broker and make your own independent decisions regarding any securities mentioned herein. Affiliates of MadHedgeFundTrader.com may have a position or effect transactions in the securities described herein (or options thereon) and/or otherwise employ trading strategies that may be consistent or inconsistent with the provided strategies.

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