At the end of October 2021, Bitcoin (BTC) miners were euphoric and very confident in the appreciation of the cryptocurrency. A few days earlier, on October 20, the cryptocurrency had reached a new historical milestone by touching the $65,000 level. He had recorded a 20% increase in just seven days, and his expectation was that the escalation would not stop there.. As the specialized media reported at the time, this belief caused the miners to refuse to sell their bitcoin on the market, causing a supply shock.
In November, the crypto asset maintained its bullish bias and reached its historical maximum: USD 69,000, somewhat confirming miners’ expectation that there was room for further appreciation. Nevertheless, It is possible that its behavior, added to other market factors, has contributed to the rise. After all, according to the law of supply and demand, the less of an object of desire the market has available, the more expensive it tends to be.
Shortly after this rally, the price of bitcoin fell again and is currently well below its all-time high. For reference, at 5:15 p.m. on July 28, 2022, each bitcoin was trading at $23,845.60, reflecting a bearish phase that has scared many people, especially adventurers thirsty for profit, but with little knowledge to understand. and adequately exploit the peculiar volatility of that market.
With the crypto asset sitting idle for a few months, the behavior of the miners has changed. If before the best thing was to hold on, now the strategy is to sell. Above all because, with such a long minimum period, miners need to sell their BTC to finance the activity. For those who don’t know, when a miner solves a block of operations data, he receives a subsidy from the network itself, in bitcoin.
John Blount is CEO of FMI Minecraft Management, explains that mining has costs, with electricity consumption being the largest. In a global scenario of rising energy costs due to the Russian-Ukrainian war, miners naturally start to see smaller margins. Therefore, the devaluation of BTC only contributes to making the margin even smaller. But, by unloading their positions, they fuel the bearish cycle by increasing supply, just at the time when many made the same decision.
“As can be seen, the behavior of the miners can indicate the movement of cryptocurrencies. Obviously, there are other variables to consider, even the way miners act can be a reflection of other movements. However, following them closely is a good way to make decisions that help minimize losses and rethink the investment strategy adopted.”, stated John Blount.
According to him, perhaps the current behavior of the miners is indicative that the bearish period should last for some time. However, as with any equity investment, the bottom may not be that far away. Soon BTC could appreciate again. Highly specialized investors will be the first to notice. Subsequently, shocked by the action of these investors, the miners will change their behavior and tip others to increase their cryptocurrency positions again.
“BTC has no control, its ups and downs are the result of market fluctuation. And miners are in a position, within that framework, that gives them the privilege of noticing changes almost immediately. Therefore, in addition to validating the data on the blockchain, miners are like compasses that show the direction in which all crypto assets are moving.”, he points.
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