It would be difficult to believe that one Bitcoin (BTC) was worth over $17,000 in December last year, given its current market value of around $3,400. This steep price drop has considerably affected the individuals and organizations that are involved in mining the cryptocurrency. Recent reports state that many miners in China are now short selling Bitcoins as a means of ‘insurance’ or hedge against falling digital asset prices.
Mining has become less profitable recently due to the bearish market trends of Bitcoin. When prices for digital assets were higher, miners would hold onto their coins for long periods in hopes of higher profits, but many miners say that this is not the case anymore. A Chinese miner named Jin Xin told a Chinese news outlet that many of his fellow miners had already started shorting BTC to hedge against the falling market prices. He 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.”
Additionally, he’s purchasing second-hand mining devices and using them until they depreciate to the point of unprofitability. Then he tears down the machines and sells off the parts. Xin says that he’ll continue doing this cycle as long as the downward trend in the market continues.
Mining profitability has been a significant point of discussion for many lately due to the plummeting of 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.
It is unusual to observe Chinese miners exercise shorting methods, as the country has generally frowned upon the practice. “Frowned upon” being the operative term as they are still legal. BTC miners in China are perhaps following in the footsteps of Gold miners in the country who were accused of doing the same a few months ago.
It is difficult to predict how the market is going to behave next during this bearish phase, but it is evident that people who had invested in the market when prices were high in the hopes of making a profit, will be looking for a “parachute” during this time.