“If I mine 30 tokens in the next month, while its price may continue to fall by another 10% 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,” said Jin Xin, an ordinary Chinese miner.
The current Bitcoin price chart entirely mirrors this market’s last dismal bear market in late 2014 and early 2015. At that time, veteran miners were keep mining and holding their coins during the dark days and got amazing returns in the subsequent bull market in 2017.
However, although the “holding law” used to be a mining Bible to the old miners, it does not seem to work in this round bear market.
Miners are facing with a more complex market: compare with the market four years ago, there are 4 million more bitcoins circulating in the current market along with thousands of exchanges that allows 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 timethrough various financial tools provided by exchanges to avoid market risk. The Bitcoin mining model has upgraded from the factory model to a financial model.
However, the frequent hedging operations makes miners the biggest power of short selling Bitcoin, either intentionally or unintentionally.
“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,” said Jin.
Jin is a normal Chinese miner. He started his mining business in October 2017 and particularly target the GPU miners. He said that the money he earned in the first two months from mining is much more than the sum of profits he made in the past three years in other business.
Nevertheless, the great profit only lasts for two months, and in 2018, the entire crypto market is gradually turning to a bearish trend.
Accordingly, Jin has also developed its own bear market survival strategy: he buys secondhand GPU miners from quitters to enhance his computing power, once reaches the ‘shutdown price’, he will shut down his miners, dismantle the GPU chips and sell them to game players. When the bull market comes, he will purchase the GPU chips again and sell them to miners.
As time goes, the ‘double-edged sword’ nature of financial tool opens its wide mouth, and the bitcoin futures, which were born as a safe-haven asset end up lives in speculation.
Miners are hibernating in this winter and waiting for next the next spring to come.