If you would like to determine how chain reactions work, you cannot realize an area better than money markets. And if those markets are cryptocurrency markets, then you can imagine the risk involved.
It is often observed when a cryptocurrency falls, for example like Bitcoin; it took a toll on the costs of all alternative cryptocurrencies. And as costs fall continually, panic buttons are hit by more cryptocurrency players, therefore propelling the market down.
Chinese cryptocurrency miners were opting to short sell Bitcoin to cushion themselves against the falling costs. Cryptocurrency has witnessed a turbulent year because of falling value and instability.
Bitcoin, specifically, has had a turbulent year recording its lowest ever value when reaching a peak in 2017. The value of Bitcoin has translated to losses for miners and different cryptocurrency investors all across the world.
Cryptocurrency miners in China have resorted to short sale Bitcoin to cut back themselves from acquisition losses.
Many of the Chinese Bitcoin mining pools are short-selling Bitcoin as a hedge against the falling Bitcoin costs. Mining has already become an unprofitable business since the costs plunged below $4,500 level.
Jin Xin, a Chinese crypto-miner said, “Many of my fellow miners are short-selling Bitcoin to hedge against the unbearable market conditions.” He went on to further add, “If I mine 30 coins in the next month, the price may continue to fall by a further 10 percent. I shall place a short order on the exchange to sell them at the current price but deliver one month later.”
In an act of self-defense, Chinese cryptocurrency miners have been short selling Bitcoin, but few of them like Jin Xin has opted to buy second-hand miners.
Once they buy second-hand miners, they use them as machines until they are exhausted, and no more profit is expected from them. The machines are then dismantled to the parts, and the parts are sold off.
Coinshares recently conducted a study and found that many of the miners are optimistic about the prospects of Bitcoin and are shifting to other business for the time being.
However, the miners themselves are short-selling the Bitcoin is a bit of concern, and this leads to the development of no significant rallying in the prices of crypto in the near future.
Will, it benefit Chinese Crypto-Miners who are short-selling of Bitcoin to stay in the market? Share your thoughts in the comments.