Chinese miners "sell coins and crash the market" What is the truth about Musk's Spring Festival effect

Recently, a view has been circulating in the overseas cryptocurrency community, which is actually a long-standing view: Chinese miners are selling coins to dump the market, while American institutions are continuously buying. Some KOLs also said that the drop in the price of Musk on January 29 was offset by the miners' dumping. This view has also reached its peak due to the emergence of several recent data.

One piece of data is that the world's largest Bitcoin mining pool, F2Pool, suddenly began to experience a large outflow of Bitcoin in January. CyptoQuant data showed that from January 13 to January 31, a total of about 109,715 Bitcoins flowed out, with a total value of US$3.6 billion based on the price on January 31.

Another data of CyptoQuant, Miners' Position Index (MPI), shows that miners as a whole began to sell coins starting from December 2020, which is also related to the crazy rise of coin prices in December. The black line is the trend of coin prices, and it can be seen that the miners' selling of coins is consistent with the trend of coin prices.

As Bitcoin has been hovering around 30,000 recently and the industry is relatively sluggish, some overseas public opinion has "blamed" the decline in coin prices on Chinese miners selling coins.

In response to this, F2Pool co-founder Shenyu responded: F2Pool miners have currently mined more than 1 million bitcoins. Due to its long history, it is associated with most exchange addresses, including Coinbase and Mtgox. It is possible that too many associated addresses have data that needs to be verified. In addition, it is normal for miners to cash out to buy machines and pay electricity bills, so there is no need to make a fuss. Sometimes you squat to jump higher.

To be honest, Shenyu’s response was rather vague. It pointed out that the statistical data might be wrong due to confusion in the addresses, but also said that it was normal even if miners cashed out and sold their coins at high points.

Two other things also reinforce this judgment:

1. Spring Festival effect. When the Lunar New Year is approaching, there is a large demand for fiat currency in Greater China, so miners need to sell coins. However, Gate.io Research Institute once collected and analyzed the data of Bitcoin prices from 2011 to 2018 and found that the Spring Festival effect was not reflected in the data.

2. Some Bitcoin miners, led by Jiang Zhuoer, began to switch to mining and investing in Ethereum. Jiang Zhuoer also personally exchanged all his Bitcoin holdings for Ethereum. In China, some miners have indeed begun to switch from Bitcoin to Ethereum.

However, Wu said that after talking and investigating with many industry professionals, he came to the following conclusions:

First, Chinese miners are not selling a large number of coins recently. Hoarding coins in a bear market and selling coins in a bull market, selling coins to pay electricity bills, and switching positions are indeed the choices of some different miners. We consulted many mining and OTC industry professionals, and their feedback was different, but there is no large-scale selling of coins by a large number of miners, but it is a continuous behavior.

Another point worth noting is that it is not easy for Chinese miners to sell their coins. The Chinese government is currently cracking down on the use of cryptocurrencies for telecom fraud and gambling money laundering. Some miners, out of fear of having their cards frozen, try not to sell their coins unless they need to pay electricity bills.

Second, the situation of F2Pool does not represent the overall mining industry. CyptoQuant also has data from a large number of mining pools such as Antpool, CoinIndex, and ViaBTC, none of which have experienced significant fluctuations in the recent period. Therefore, it is highly likely that a large miner in F2Pool is making wallet adjustments or selling coins.

Third, miners selling coins has little impact on the overall industry. The direct trigger for this round of decline is the uncertainty of the Biden administration’s cryptocurrency policy (refer to the biggest “black swan” in the cryptocurrency circle: Is the new U.S. government hostile to cryptocurrency after Yellen takes office?), and the technical side is a phased correction, and some U.S. investors have sold coins on Coinbase for profit.

Grayscale alone purchased more than $1.3 billion worth of Bitcoin between January 13 and January 27, when the above-mentioned "fish pool dump" took place. On January 25, Marathon, an American mining machine manufacturer that purchased 100,000 S19s, announced the purchase of $150 million worth of Bitcoin. The news that endowment funds of many top universities in the United States, such as Harvard, Yale, and Brown, continue to buy Bitcoin will also increase the confidence of institutions to continue buying. The quantitative easing policy that the Biden Democratic government may introduce will make Bitcoin a further tool for institutions to fight inflation.