Some Chinese Bitcoin miners have started to short sell Bitcoin as the profitability of the business becomes insecure. For those who are not familiar with the term, short sell is basically a method to gain profit by selling a borrowed asset to a buyer and repurchasing the asset later to return it to the lender. This method only profits when the price of the asset is expected to fall in the future, which is what the Chinese miners are expecting of Bitcoin.
A Chinese miner named Xin Jin that recently spoke to a Chinese media outlet 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.”
He further explained that miners are doing this to protect themselves from getting eliminated as prices continue to drop. Other than that, he shared that he also purchases second-hand mining machines and utilises them until they are not efficient enough to gain profit for him. He will then dismantle them and sell the parts separately. He would repeat the process if the Bitcoin market does not show a promising future.
Short selling has a negative image in all kinds of markets, as majority of the community perceives it as an act that potentially drops stock prices. This occurs as, in this case, short sellers sell borrowed Bitcoin which they do not own at the moment, temporarily increasing the supply of Bitcoin in the market while demand for the cryptocurrency remains, causing prices to drop.
The fact that Chinese miners have opted to short sell Bitcoin despite knowing the consequences of the method proves that they are not optimistic about the future of the Bitcoin market. Moreover, if miners come up with more selfish ways to earn profit from the market by damaging it further, it is hard to envision a day where Bitcoin will reclaim its glory as seen in the year of 2017.
It is worth mentioning that not all miners have the same views as the Chinese miners that are short selling despite knowing that their actions may cause a severe chain reaction in cryptocurrency markets. Coinshare made a study dated 26 November 2018 showing that many are still optimistic about the possibilities held by the Bitcoin market and look to relocate their business for now.
The post Chinese Miners Short Selling Bitcoin to Protect Themselves appeared first on Cryptoverze.
