Chinese Crypto Traders are Short Selling BTC to Hedge Against Falling Prices
Bitcoin has fallen about 85% from its all-time high and mining has become increasingly less sustainable. Earlier when virtual currencies were worth more, miners held the coins over an extended period of time. However, that is no longer the case.
An ordinary crypto miner from China, Jin Xin said:
“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.”
Miners are now facing with a more complex market than before. When compared to the market 4 years ago, there are 4 million more bitcoins circulating in the current market along with thousands of exchanges that allows a crypto-fiat exchange. The total capitalization of digital assets in circulation also reached a new high.
The new generation miners no longer simply holding their coins. Hedging becomes one of the essential skills for miners to survive in the bear market. They need to lock in yields ahead of time through various financial tools provided by exchanges to avoid market risk. The Bitcoin mining model has upgraded from the factory model to a financial model.
“Everyone is short-seller, we do this for self-defense but that will lead to a further decline in cryptocurrency price… Without short selling, we will be eliminated ultimately, but if everybody keeps doing this, we will finally die together, which is quite heroic,”
Mining profitability has been a vital factor for many due to the falling digital asset prices. It is well known that high hash rates help in finding more Bitcoin blocks, but hash rates have been in decline across the world. Mining devices like the SHA256 miners are being sold by the kilo to hedge against operating losses, but some optimistic miners are also trying to relocate.
Noticeably, Bitcoin miners are using the same tactic deployed by gold miners of China. Analysts say that practices of speculative short selling have broken records this year.