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Bitcoin - Forex Combo Strategy: Photonic Mining
Welcome back everyone to this week’s edition of my Bitcoin - Forex Combo Strategy. The sell-off in Bitcoin has paused for now, and price action is stabilizing since last week’s update “Bitcoin - Forex Combo Strategy: Cryptocurrency in Africa.” Bitcoin moved into my support zone between $6,380 - $6,550, with an intra-day low of $6,470, before recovering to the upside. Despite the stabilization, the bearish trend remains in place and it remains too early for bulls to celebrate.
The Emergence of Photonic Mining
Another potential threat to the price of Bitcoin may be lingering. Michael Dubrovsky, Visiting Researcher at the Technion University Materials Department, Marshall Ball from Columbia University, and Bogdan Penkovsky of the University of Paris-Saclay published a paper discussing major changes discussing energy usage in Bitcoin mining. Their idea to slash energy consumption includes photonic chips, optical computers, and a new algorithm labeled HeavyHash.
In the paper, the three researchers noted: “Heavy reliance on electricity has created scalability issues, environmental concerns, and systemic risks for Bitcoin. Mining efforts have concentrated in areas with low electricity costs, creating single points of failure. Although proof of work security properties relies on imposing a trivially verifiable economic cost on miners, there is no fundamental reason for it to consist primarily of electricity cost.” Energy consumption has been a major issue, a Cambridge University research team concluded that Bitcoin mining consumes more electricity than Switzerland.
Cost of Electricity or Cost of Hardware?
While many miners will jump at every opportunity to slash operating costs and make mining more profitable, photonic mining may not deliver on that front. It merely shifts the expense structure, as the hardware required is considerably more expensive than the current generation of ASIC miners. It does address scalability issues for the network, but given the heavy investment in the current mining infrastructure, it may remain impossible to change Bitcoin mining. A hard fork is most likely required to implement such a drastic change or the creation of an entirely new non-Bitcoin related coin.
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Will Photonic Mining Result in Centralization?
Should photonic mining overcome the odds and become part of the existing Bitcoin universe, it may harm the price of Bitcoin, and increase existing centralization concerns. Before the first-ever collapse in the hashrate of Bitcoin, during November and December of 2018, when prices plunged to almost $3,000, mining was geographically diversified. After prices plunged, many miners were forced to shut down operations as they were mining losses.
Big mining farms were able to weather the storm and grew in size. This has created a centralization issue many choose to ignore. The price of Bitcoin will be heavily impacted if one of the big ten mining farms goes offline. Geographically speaking, centralization becomes an even bigger issue, with 81% of mining taking place in China, including seven out of the top ten mining farms located there. Introducing photonic mining may even further centralize mining, and this will create critical issues.
Photonic mining may not be as cheap as advertised. Heaters are required to operate optical switches as the refractive index needs to be changed. Silicon photonic circuits additionally require heaters, and this increases the energy consumption. While photonic mining creates a great topic to discuss, the bottom line remains energy consumption to achieve the most profitable mining operation. Therefore, sourcing the cheapest energy source remains paramount. A new approach, that ultimately leads to the same or similar problem, is not worth pursuing.
Bitcoin - Forex Combo Portfolio Updates
I have made no changes to my cryptocurrency portfolio, but I am looking for the right opportunity to short Ethereum. I currently hodl 1,000 Bitcoins, at an average entry price of $7,950, 60,000,000 Ripples, which carry an average entry price of $0.3015, and 100,000 Litecoins with an average entry price of $52.80. The three charts below show my Bitcoin, Ripple, and Litecoin holdings.
I also keep my 250 lots long Gold position, that I took on October 18th 2019 at $1,485.00 for a margin requirement of $372,798, with a pip value of $250. Gold advanced, but reversed after the NFP report ignited a rally across financial markets. I remain patient, and in case of a sell-off, I am planning to add another 500 lots below $1,400. The reversal in the USDCAD caused my stop loss to trigger yesterday, December 6th 2019, at 1.3175, and closed my 500 lots short position for a profit of 75 pips or $287,204. I also decided to close my 500 lots short position in the EURJPY at 120.000 for a profit of 25 pips or $115,076. The three charts below show my open Gold position and my two closed forex trades.
On December 2nd 2019 I bought 500 lots in the EURUSD at 1.1015 according to this trading recommendation “EURUSD Fundamental Analysis – December 2nd 2019.” The margin requirement was $110,606 with a pip value of $5,000.00. My stop loss closed this position at 1.1100 for a profit of 85 pips or $425,000. On December 3rd 2019 I sold 500 lots in the AUDCHF at 0.6790 according to this trading recommendation “AUDCHF Fundamental Analysis – December 3rd 2019.” The margin requirement was $68,401 with a pip value of $5,050.71. I closed this position the following day at 0.6730 for a profit of 60 pips or $303,043. On December 4th 2019 I sold 500 lots in the EURGBP at 0.8525 according to this trading recommendation “EURGBP Fundamental Analysis – December 4th 2019.” The margin requirement was $110,606 with a pip value of $6,568.50. On December 6th 2019 I closed this position at 0.8425 for a profit of 100 pips or $656,850. On December 5th 2019 I sold 500 lots in the USDJPY at 108.75 according to this trading recommendation “USDJPY Fundamental Analysis – December 5th 2019.” The margin requirement was $100,000 with a pip value of $4,603.92. The four charts below show my closed EURUSD, AUDCHF, and EURGBP trades, and my open USDJPY position.
Here is the summary of my Bitcoin - Forex Combo portfolio: I hodl 1,000 Bitcoins worth $7,416,000, 60,000,000 Ripple worth $12,498,000 and 100,000 Litecoin worth $4,464,000 plus a total cash portfolio worth $5,308,405. Also, I have the following positions in my forex portfolio: a 250 lots Gold long position worth -$259,702, and a 500 lots USDJPY short position worth $155,247. My total Bitcoin - Forex Combo portfolio is worth $29,581,950, up $601,931 from last week’s value of $28,980,019 and off of my all-time which stands at $34,799,502. Are you ready to grow your account? Take your first step now, open your own PaxForex Trading Account today and follow my Bitcoin - Forex Combo Strategy! Comment below with any questions you may have and I will be happy to help you get started!
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