Miners themselves turn shorters of Bitcoin as its price goes below $4,500. Many of them doing it to stay in business.
If you want to see how chain reactions work, you can’t find a place better than financial markets. And if those markets are cryptocurrency markets, then you know the rest. This is a world where fall in a single cryptocurrency (Bitcoin) takes a toll on the prices of all other cryptocurrencies as well. And as prices fall more and more, panic buttons are hit by more and more players, thus pulling the market down even more. As Bitcoin touched its lowest mark since September last year it’s turning out that the foundation to make it fall that much had already been laid by none other than the miners themselves.
That’s right. Many of the Chinese Bitcoin mining pools are short-selling Bitcoin as a hedge against the falling Bitcoin prices. Mining has already become an unprofitable business since the prices plunged below $4,500 level, and it’s turning out that in an effort to shield their operations from the fall miners themselves have done the hard work to make Bitcoin fall even more by short-selling it. This is a new trend reflecting the changing dynamics of crypto space.
Back in the days when Bitcoin’s prices were touching the sky, miners used to hold on to their mined Bitcoins in expectations of better ROI. Unfortunately, that is no longer the case. Nowadays miners have not only sold all their stored Bitcoins but have also been betting on the price of BTC to fall even more by short-selling it. According to Jin Xin, a Chinese miner who recently spoke to a Chinese media outlet, given below is how things are working nowadays:
“If I mine 30 coins in the next month, while the price may continue to fall by another 10 percent according to the current trend, I shall place a short order on the exchange to sell them at the current price, but deliver one month later.”
According to Jin this is a measure that miners need to take in self-defense. If they don’t do it many of them will be eliminated forever.
However, it’s also not that all miners think that the future is gloomy. A recent study conducted by Coinshares found that many of them are optimistic about the prospects of Bitcoin and are relocating their business for time being. However, the miners themselves shorting Bitcoin is a concerning development which suggests that there’s not going to be any major rally in the prices of crypto in near future.