Signs of a full recovery from the China mining bans of April and May are now in sight. Looking back, they will likely be seen as a universally good thing for bitcoin. The USA is now the dominant bitcoin miner and along with Kazakhstan and Russia is among the big winners from the China exit.
It is a remarkably resilient network that can lose 50% of its miners and recover so quickly with zero interruption to the overall operation of the network. The only impact was block times rose above 10 minutes for a couple of months as network difficulty adjusted.
Network hash rate has not recovered its May peak yet, but it is close. The country split below shows network hash back up at 125 EHs. The chart is about a month old though, so we are closer to 150 EHs now. Expect a new mining hash rate high before the year is out.
This would rank as the most significant relocation of computing power ever. In total about 50 Eh/s has been redistributed across the globe. In raw calculating power it’s like relocating 100 billion laptops. Not trivial in six months.
Since it’s topical, it is worth touching on just how small the overall energy footprint of bitcoin mining is, even with all its computing power. It is the equivalent to the consumption resulting from gaming and watching YouTube.
That is still a significant environmental impact but consider that bitcoin is now transacting $15 billion of value per day through the network. That’s about the same as Mastercard and still some way behind Visa. Mastercard has 21,000 employees making that happen. Bitcoin has none. In terms of overall efficiency there is only one winner, which is exactly why it is winning.
For the miners, it will be a year to remember. Those not in China have had record years in terms of revenue and profit. Those in China are out of business. Mining is a brutal game with huge capital requirements, huge risk including technical, geographical and political as well as financial. They deserve their returns; it is only for the very brave and in 2021 they have not let us down.
Metaverse preparation is accelerating across the world with Nike lodging patents for digital versions of their shoes. It makes sense, presumably consumers will treat their avatars as digital versions of themselves, which will mean only the coolest brands will do. Is it possible that the digital versions will cost the same as their physical equivalents? It might be.
Nike trainers cost about $15 to make and sell for more than $100, so $85 (or more) is essentially a payment to use the brand. This ‘charge’ will likely still apply in the metaverse. Brands will also have to wrestle with the issue of digital scarcity. Nike won’t want too many of a particular type of shoe floating around the metaverse. Could we see the big brands launching their own public blockchains so we can validate that in fact only 800,000 of us have the red trainers with the gold trim? Surely it has to happen for their digital assets to have value.
Elsewhere spaceship sales are going well too. The new video game Infinite Fleet has sold out of some classes of spacecraft before the game goes formally live. These are some of the cheaper ships that can be purchased.
Whether you think digital assets have value or not, the market for them is real and growing. If you don’t own a spaceship yet, why not?
Here’s the Deal
In terms of setting records for spending, it looks like there will be no President like Joe Biden. It’s hard to keep track but so far, we have had the American Rescue plan at 9.1% of GDP, last week the Infrastructure bill ($1 trillion in total, $550 billion more than previously planned) at 2.6% of GDP and next in line for Congress is Build Back Better at $2 trillion, 9.5%. No chance that one gets approved at that scale, but he might get half of it through.
Federal tax revenue is around $4.2 trillion annually, those spending bills will be more than that on their own, excluding the usual level of spending on guns and butter.
The scale of these plans is not to be underestimated, as a percentage of GDP they are far larger than the Marshall Plan, we’re looking at 1930’s New Deal stuff. The difference is in 1934 unemployment reached 24.9%, today it is 5.4%.
If something goes wrong in the next five years and unemployment starts rising, what will the US do then?
For now, we know for sure the money printers will be running seriously hot for the next 18 months at least. This is both what we have been predicting and what we have been hoping for. A tidal wave of bonds will be hitting the market The fact that it is utter madness matters not. Simply position accordingly and look forward to landing at America’s shiny new Joe Biden International Airport when you next visit.
The second image, using the same data, does not weight for volume. Looking more like a neural network.
Naturally emerging ecosystems tend to show similar patterns, which is amazing given they are essentially random.
With power shortages across Europe, perhaps the ECB might keep its head down a bit and focus on their one and only mandate, stable prices. Not a bar of it though, it seems polar bears are now floating through the streets of Frankfurt.
Despite these ‘stable price’ efforts, power costs are now rising fast. This is particularly acute in Germany which has the highest electricity prices in the world. They pay 37c/KwH. In America it’s 15c, in China 9c and in India 8c. The Germans are not amused and they have a point. As far as the EU goes, they pay for everything it does including what at some point will look like a giant case of economic mismanagement.
The German press have found their inflation culprit.
“The Chanel lady keeps the savers and the pensioners poor”.
Yes, she does.