What Boosts Bitcoin (How Bitcoin Makes Money)

What Boosts Bitcoin As the cryptocurrency market enters the fourth quarter of 2021, institutional adoption is increasing. Bitcoin recently broke the $20,000 mark, which is positive news for Bitcoin as it has already achieved significant innovations in multiple areas.

Institutional investors are leveraging these new technologies to improve their capital allocation. However, despite this, the trend is still in its early stages: institutional investment seems to have not realized expected returns and continues to drive the price of Bitcoin up. Additionally, the price trend of Bitcoin has shown bearish signals due to volatility and declining trading activity. (Cointelegraph)

Since the end of the bull market in 2018, the price of Bitcoin has been steadily rising. At the time of writing this article, the value of BTC is around $1 billion, compared to around $1.2 billion in early 2020. (AMBCrypto)

How Bitcoin Makes Money

Editor’s Note: This article is from Cointelegraph China (ID: cointelegraphChina), author: BENJAMINPIRUS, authorized to be reproduced by Odaily Star Daily.

After reaching a historical high in 2017, Bitcoin experienced a prolonged bear market cycle. Since then, investors have been looking for alternative ways to profit.

As more and more people transfer their funds to BTC as well as outside the cryptocurrency market, more institutions are actively positioning themselves in Bitcoin investments. Some large companies including Grayscale and BlackRock have also started buying Bitcoin as their primary investment asset category. According to recent data from crypto analysis company Chainalysis, Bitcoin miners’ profits exceeded $1 billion in the first quarter of 2021.

The total revenue of these mining companies is about 1.5 billion RMB. This figure has grown by over 300% since 2020. In addition, in early 2019, one of the world’s largest Bitcoin mining companies, Marathon Digital Holdings, announced the purchase of 2 BTC for nearly $500 million, which is now worth nearly $2 billion. The cost of Bitcoin mining has risen by an average of 20% per transaction compared to transaction costs.

To achieve higher returns, in addition to mining Bitcoin, the use of third-party software or hardware wallets is also necessary. Bitcoin mining is a financial activity built on blockchain. It is described as a “permissionless network” operated by developers and users. It can also be used to create decentralized applications, games, and other services based on blockchain technology.

There are two main uses of Bitcoin mining. The first is an open-source payment system, which allows developers to directly receive rewards from anyone and send them to community members. The second is to earn rewards through Bitcoin mining. For example, miners can promote the network development of Bitcoin by providing interoperable and secure infrastructure. “We can use this advantage to earn Bitcoin.” Bitcoin miner manufacturers usually rely on mining Bitcoin themselves without having to sell their Bitcoin; however, due to the increasing difficulty of Bitcoin mining, a significant amount of electricity is required.

Bitcoin mining equipment manufacturers have to find a place for machines to operate as they want to ensure that their work is guaranteed. However, the energy-intensive industrial environment where they cannot continue working without specially designed chips could disrupt the industry, affecting the survival of the entire industry. The operational status of mining farms is a huge opportunity for companies wanting to engage in mining. But for those who want to become full-time employees or engage in Bitcoin mining, it is a very ideal choice: “If you have a professional technical team, and your skills are high and you know how to make money, you can place this position there,” when asked “Why buy a mining machine?”.