Opinions

Market Decline Causing More Chinese Crypto Miners To Sell Short

The recent Bitcoin price’s data chart completely reflects the current market’s last downcast near market between late 2014 and early 2015. During this time experienced miners were carrying on mining operations and holding their mined coins during the bad days in order to get significant profits in the following bull market held in 2017. This so called “holding law” used to be like a rule book to success for old miners but it seems to not be working for the miners in this round bear market. The miners now face a more complex market, as compared to the market that existed four years ago there are four million more Bitcoins moving around in the current market accompanied with thousands of crypto exchanges which enable exchanging crypto for fiat. The complete profit of digital assets circulating the market has also soared to increased heights.

The miners of the new generation cannot simply rely on holding their coins. Hedging has become one of the most crucial skills required in order to survive in the bear market. Miners need to secure their yields ahead of time using different financial tools given by exchanges so as to avoid market risks. The Bitcoin mining model has been transformed from the factory model to a financial model.

The Chinese crypto outlet 8BTC reported on Thursday, December 6, that Chinese miners were turning into the biggest short sellers both in the local and international market, after hedging operations increased in the recent bear market.

The adverse market decline that occurred in the previous month has led miners from this generation to start hedging their coins in order to avoid any risks in the market. Due to the frequent hedging activities crypto miners have become the biggest short sellers of Bitcoin (BTC).

8BTC reports a Chinese miner, Jin Xin, who ventured into the crypto mining industry in October 2017 stating that the money he earned through crypto mining in the first two months was significantly bigger than the total profits he made during the past three years through various other businesses. Jin stated,

If I mine 30 tokens in the next month, while its 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 current price but deliver one month later.

The new strategy that Jin reportedly developed and adopted was to survive the bear market. The strategy involves purchasing used graphic processing unit (GPU) miners to increase his machines’ performance. Once the machines reach the shutdown price, Jin powers down the equipment, removes the graphic processing unit (GPU) chips and sells them to game players.

Crypto miners in China are purposely selling their mining equipment by weight instead of price per unit since the fall in the market had caused a significant drop in profits through mining. The models that were the most common ones sold by miners, once they reached their shutdown prices, included Antminer S7, Antminer T9, and Avalon A741.

Bitcoin investors have been trying to figure out who is responsible for the recent decline in the value of cryptocurrencies. This situation has escalated causing many of the investors to move to more profitable options. Keeping in the view the current situation, only hard and fast supporters of cryptocurrency such as Chinese crypto miners and institutional cryptocurrency investors have decided to remain in the crypto game. The current scenario of the market has caused the future of Bitcoin in China, which was considered as a safe haven asset, to be clouded with speculations. Miners are now pulling out of this area and are waiting for the next spring to come.

Habibah Shahid

A Computer Science student but a writer at heart. Habibah writes about Cryptocurrencies and the underlying technology, Blockchain, with the perspective of a Computer Scientist. Email: Contact the editor at editor.news@blockpublisher.com

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