What surging Bitcoin prices mean for Bhutan

After hitting a low of USD 16,452.20 on 25 November 2022 Bitcoin has seen a continuous mostly upwards rally from January 2023 with an even sharper rally from mid-October 2023 onwards that has only gone up and up reaching its highest ever price of USD 67,558 as of 8 March, 2024 evening.

Last year this paper said that of the Nu 6 bn a year tab for the 50% civil service pay hike effective from July 2023 DHI’s Bitcoins would cover around Nu 4 bn for a total of Nu 8 bn for two years.

The higher price of Bitcoin is good news in that DHI will have to sell fewer Bitcoins than it would have in July 2023.

In 30 June 2023 Bitcoin hit USD 30,587 but the price came down to around USD 26,000 and stayed that way will mid-October 2023 after which there was a sharp and continuous rally crossing USD 42,000 by the end of 2023. A sharp rally was seen in mainly February and March 2024.

Bhutan has been strategically selling its Bitcoins with the aim to sell when the cost goes the highest. Bhutan sells through both Bitcoin exchanges or over the counter depending on the demand.

The prices that will be got is very similar to the Bitcoin prices listed in the market especially these days with the huge demand.

The main reason that Bitcoin prices have been appreciating is that big institutional and financial investors like Blackrock, Fidelity, Invesco etc. in the USA have been allowed to open and invest in Bitcoin Exchange Traded Fund (ETFs) by the Securities and Exchange Commission (SEC) of the USA. 11 of them have been approved so far.

The crypto skeptic SEC was initially opposed to this but lost court battles on the issue and the US judicial system ruled that Bitcoin ETFs be allowed.

Simply put, a Bitcoin ETF allows a person using the stock market to invest in and profit from the rising prices of Bitcoin without actually having to directly own the asset but shares of the asset instead. The company or ETF in concern would own a large number of Bitcoins.

These Bitcoin ETFs have been buying up large chunks of coins further pushing up prices.

Apart from this, initially in the US financial market many people had bet in the markets against the price of Bitcoin betting it would go lower, but when prices started going up the bets had to be liquidated.

This improved the market sentiments for Bitcoins.

The strong performance of the US economy, expectations that the Fed Reserve Bank of the USA will not raise interest and may even decrease them and getting over the Crypto bad news of early last year have also added wings.

The halving of Bitcoin is expected in April 2024 when the reward of mining blocks will reduce from 6.25 to 3.125 bitcoins per block mined. Past halvings in 2020, 2016 and 2012 have also seen prices increase for 7 to 8 months after the halving.

The only downside of the increasing price of Bitcoin is that there are more miners who are now mining Bitcoin which increases the difficulty rate.

The advantage for Bhutan is that it entered the mining space around 2019-20 when the price of Bitcoin was around USD 5,000 to 8,000.

Bhutan also bought its machines when they were cheaper as the increase in Bitcoin value also leads to an increase in the cost of mining machines.

On the USD 500 mn and 600 MW project with Bitdeer on building mining centers in Bhutan so far, the 100 MW project in Gedu has been mining since July-August 2023.

The collaboration is raising funds and will start building the remaining mining centers soon.

The unique feature of this project is that it will be operational for 9 months when power production is at its highest. Bhutan gets a share of the coins mined for providing the land and power.

DHI’s own mining centers are listed as Heavy Voltage industries but the value gained from converting that electricity into Bitcoin is much higher and it can be sold in USD. At the same time, top priority is given to domestic consumers and local industries and then Bitcoin mining is the lowest in the priority list for power.

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