Are they all "hoarding coins"? Ethereum miners hold a record high of 1.69 million coins

Ethereum miners appear to be “hoarding” the ether they mine, according to new data, a sign that could indicate confidence in the project.

According to data disclosed by crypto market data platform Santiment, the amount of ether held by all Ethereum mining pools has reached a new high of 1.69 million ETH, almost the same as last October. Not only that, the amount of ETH held by mining pools has been steadily increasing since 1.64 million in November last year, without any interruption.

Santiment founder Maksim Balashevich wrote in Spencer Noon’s monthly subscription column Substack:

“The steady accumulation of tokens by Ethereum miners suggests that most block creators have high confidence in the project, at least relative to current market conditions.”

Compared to the total ETH tokens of 152 ETH accumulated by all Ethereum mining pools a year ago, the number of ETH held by miners has increased by 11%. It is worth noting that despite the price of Ethereum falling from $366 to $170 (almost halved), the number of tokens held by miners increased sharply from 1.54 million to 1.69 million in the four months ending in October last year.

One possible reason why miners are willing to "hoard coins" when prices fall is that the entire cryptocurrency market has undergone a significant improvement in the first six months of last year. During that period, the price of Ethereum also rose by 120%, and market sentiment has gradually turned bullish.

Another piece of good news for the market is that Heath Tarbert, chairman of the Commodity Futures Trading Commission (CFTC), recently reiterated in an interview with Bloomberg that Ethereum futures are in the works and that Ethereum futures contracts may be seen in the next six to twelve months. There is no doubt that this news has excited the entire cryptocurrency market, as this move will further enhance the appeal of Ethereum to institutional investors. Derivatives can be used for hedging, and are also an important part of portfolio management, and are a firm support for long positions. If nothing unexpected happens, an active derivatives market can encourage more investment, which in turn helps boost cryptocurrency prices and encourage more investment.

However, as Santiment founder Maxim Balashevich pointed out, the continued decline in Ethereum prices, which fell below $170 in late October last year, forced some miners to liquidate their assets. But some analysts believe that the previous price drop is likely to be a correction before the bull market, based on the current market situation.

The result is obvious. By early November 2019, the amount of coins held by Ethereum miners had returned to 1.64 million.

It is undeniable that mining profitability is greatly affected by price fluctuations, which is true for every cryptocurrency. A sustained price drop will certainly hurt miners’ income, forcing inefficient small miners to scale down their operations or even abandon mining altogether. When some miners can no longer sustain themselves and decide to “escape” the blockchain, they will “bleed” and sell their tokens to make up for their mining-related losses as much as possible, which will also add bearish pressure on prices.

Looking ahead

There is also a data worth noting. The price of Ethereum rose by 36% during January 2020, and the overall trend is basically bullish. If all goes well, the number of coins held by Ethereum miners may soon exceed the high of 1.69 million.

Maxim Balashevich concluded by adding:

“Unless there is a major market volatility this time, it is likely that Ethereum miners’ holdings will exceed the ‘1.69 million’ milestone in the coming days.”

At the time of writing, according to CoinMarketCap data, the price of Ethereum was $182.75, with a 24-hour increase of 0.24%, and its market value once again exceeded $20 billion.