On the latest episode of Cryptox’s Market Talks, host Ray Salmond spoke with Dan Rosen, associate director of derivatives at Luxor, a United States-based Bitcoin (BTC) mining pool, research hub and service provider.
The show touched on a number of broad topics, including Rosen’s view on how the upcoming Bitcoin halving will impact BTC price, why Bitcoin’s volatility is set to remain in the double-digits for years to come, and miners’ ability to hedge their operations via hash rate derivatives.
According to Rosen:
“Any maturing asset goes through experiences of high volatility when it first launches, and if you compare Bitcoin to the tech stocks of the early 90s, like Apple and Google, their volatility was astronomical. Bitcoin has also touched crazy high levels of volatility in the 70% to 100% [range] four years ago. This is dropping over time, but we will continue to see this trend as the asset becomes more investable and the eventual launch of an ETF [exchange-traded fund]. One day, we are likely to see a 20% or sub-20% annualized asset class, in maybe four or five years.”
Historically, outside of pledging mined Bitcoin rewards, miners have had few options for hedging risk within their operations. Luxor’s hash rate derivatives essentially add infrastructure to this area of the industry by allowing miners to hedge their exposure to changes in hashprice. The derivatives give miners the option to predict and lock in future revenue during events of unexpected volatility that impact the efficiency of their operations.
Related: Bitcoin difficulty jumps 6% to new peak as miners ignore BTC price dip
Macro continues to impact Bitcoin’s price and miners
Regarding the macro and how this could impact Bitcoin’s price and its miners, Rosen said, “The market is starting to realize that we’re probably not going to get to that 2% inflation target rate any time soon, and it does appear that the market is starting to price in that inflation longer-term will hover around the 2.5% to 3% range. At the same time, we’re still seeing the U.S. dollar as a flight-to-safety asset, and this is impacting equities and creating macro headwinds at the same time, leading to a depreciated value of dollar-denominated assets.”
Despite this dismal economic outlook, Rosen believes:
“While Bitcoin price might not hit six figures leading into the halving or directly after it, I wouldn’t be surprised to see new lows over the next six months due to macro headwinds and then a stronger rally afterward.”
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