For years, Bitcoin’s downward price movements have long been alleged to be the result of Bitcoin miners selling onto the open market. This claim is particularly popular among cryptocurrency “thought leaders” on social media, but the entire theory is based on a glaring lack of understanding Bitcoin’s market dynamics.
Early in Bitcoin’s history, a miner selling a portion of their payouts may have had a noticeable effect on Bitcoin’s price. But that’s not true at all today. Unfortunately, because this theory inescapably arises during nearly every mid- or large-sized market selloff, it is always worth revisiting.
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Bitcoin miners today represent a smaller fraction of the bitcoin market than they did several years ago and they’re much more financially sophisticated and equipped than before.
- Miners use OTC desks instead of open market orders to shelter their coins’ from directly impacting bitcoin’s market price.
- Miners borrow against their coins to access fresh capital without liquidating their holdings.
- Bitcoin miner revenue is only roughly $55 million per day at current prices with roughly 900 BTC mined per day, a minuscule amount compared to bitcoin’s daily trading volume.
- Miners are hardly appropriate culprits for large market movements when Tesla, MicroStrategy, and dozens of wealth management companies and investment firms are now playing in the cryptocurrency markets, let alone the hundreds of “crypto-native” funds that have accrued small fortunes over the last few years of trading and investing.
The below table considers average daily spot and futures volumes in the bitcoin market, and what share of that volume would be represented by mining revenue if all daily revenue were sold at market.
No matter how the data is represented, daily miner revenue is just not enough to meaningfully move the market in any direction.
Miners are also holders. They have “diamond hands” that are stronger than most other market participants. These holders are unlikely to liquidate significant holdings because bitcoin spikes 30% in a week or unlikely to turn bearish and quickly sell because bitcoin drops 40% in a month.
Unlike most cryptocurrency investors, miners aren’t speculators. They don’t sell on whims or small market movements. And even if they did, miners simply don’t generate enough capital to meaningfully move the bitcoin markets in their current state of liquidity and trading activity.