[Analysis] Where are we in the mining cycle? - Leo Zhang

Since bitcoin's ($BTC) price bounced back from a long "crypto winter," the mining community's appetite for machines has been increasingly voracious, writes Iterative Capital's Leo Zhang. For example, Bitmain's latest product, the S17e and the T17e, sold out one minute after pre-orders became available. But mining and price action are not keeping pace with each other.

"The growth rate of machine production still hasn't matched the rate of Bitcoin's price increase. There is always going to be a delay when hashrate responds to price changes. This is because manufacturers' production capacity is inherently constrained by their suppliers on the upstream."

Zhang continues to explain the geographical distribution of large bitcoin miners to date and the potential economic effects of a soaring hashrate followed by a stabilizing price. If the price breaks down from its current level, moreover, the common "death spiral" narratives will appear in the news again. Zhang concludes: "All of these eventualities are normal, and are a natural part of the Bitcoin mining cycle."