Between the arrival and departure of the Bitcoin spot ETF, the SEC has successfully grasped the market sentiment, with people’s focus shifting to BlackRock and the bull-bear battle. However, the sadness of miners has been ignored.
In 2023, against the backdrop of the Bitcoin halving, miners chose to support Mingwen to increase their income from transaction fees. However, the arrival of the spot ETF will not harm miners’ interests in terms of coin price, and may even help increase their passive income:
With the approval of the spot ETF, more traditional investors and individual retail investors can legally purchase Bitcoin, supporting the market price of Bitcoin.
Second-layer protocols like the Lightning Network will receive a legalization boost, and activities on the high-frequency, small-value chain will continue to increase the main network transaction fees, thereby stabilizing the ecosystem.
Unlike the transition to PoS in Ethereum, miners were powerless to resist. ETHW and other projects ultimately ended in failure. The power of the trinity of Bitcoin mining machine manufacturers + miners + mining pools is not weak. In previous block size wars and the recent Mingwen battle, miners’ dominance over Bitcoin is no less than that of Bitcoin manufacturers and core development teams.
However, in the face of giants like BlackRock, the mega-scale of the entire crypto market is not enough. Although Bitcoin miners don’t say it openly, looking at the trend of their holdings, they have been continuously selling off in the past two months. This may be due to worries about the delay in the approval of the ETF, which could lead to a price decline. However, in the long run, miners have already realized the problem.
The pricing power will shift from on-chain + miners to off-chain + Wall Street.
The core of Bitcoin’s pricing power is computational power.
After the decision in 2021, computational power is inevitably shifting to the West, especially the United States. This is no longer a topic of discussion. In contrast to the regional distribution, mining pools continue to concentrate. Driven by capital efficiency, miners and mining pools form alliances, with miners still retaining control over mining machines while mining pools handle daily maintenance. The logic of their operation is simple:
Miner income = (mining machine cost – electricity cost – pool fees) x number of mining machines x depreciation rate
During the entire bull and bear market, the so-called shutdown price is most dangerous for mining pools and mining machine manufacturers because miners can only suffer losses temporarily. As long as they hold on until the bull market, they can sell their coins to break even. However, mining machine manufacturers and mining pools are in the “selling water” service industry. Once their income cannot cover expenses, they face an operational crisis.
Essentially, miners’ losses are when the income from selling coins cannot cover existing expenses. However, the actual major expense is only electricity cost. If necessary, selling coins can also recover some funds.
Bitcoin’s first block is now 15 years old, and large-scale use of mining machines has been around for about 10 years. Although Satoshi Nakamoto’s PoW mechanism is not environmentally friendly, it has helped miners survive at least five cycles of bull and bear markets, making it a great contribution.
Initially, miners were not purely playing a capital game. More participants came from the grassroots of society, including internet cafe owners, crypto geeks, and inexplicable pioneers. The roughness and chaos of the early market created the myth of getting rich quick. The cost of building positions for MicroStrategy was in the four or five digits, while their cost was even in the single digits, always making huge profits.
But now, everything is about to change.
Bitcoin’s price will be driven by computational power and will shift towards market sentiment and Wall Street.
Bitcoin spot ETFs, futures ETFs, and even ETFs for crypto mining companies are not the same. This will fundamentally change the pricing and execution logic of Bitcoin.
Under the motivation of capital appreciation, the trend of concentration of existing Bitcoin chips will further worsen. Compared to other currencies, the concentration of Bitcoin holdings is already quite dispersed, and when combined with the massive computational power of Bitcoin, achieving a 51% attack or control of the Bitcoin network is almost impossible.
But this is the logic of PoW. If a large number of capital giants enter, the Bitcoin network will, to some extent, become a PoS mechanism. Of course, this does not mean that Bitcoin generation will become a staking mechanism, but rather that excessive chip concentration may backfire. In theory, spot prices are the basis for derivatives pricing, but under a long chain of transmission, there is a possibility of imbalance in regulation and pricing mechanisms.
One can recall the subprime crisis in 2007, where subprime meant continuously packaging junk bonds based on underlying conditions and selling them. Initially, subprime mortgages no longer had a significant regulatory role in the market. Bitcoin could also face similar conditions.
With the positive sentiment of the ETF, the end-of-year options for Bitcoin have surpassed $51,000, significantly deviating from the spot market price. The price of Bitcoin, its function, and miner computational power are no longer closely related. It can be said that it has become the biggest Meme Coin, where emotions reign supreme.
In an instant, the price of Bitcoin has quickly dropped from $45,000 to $40,000, and the price volatility is comparable to that of altcoins.
Even before the arrival of the spot ETF, it has already shattered the computational pricing system that miners have built over the years. People often say that Bitcoin is different from other currencies and is a unique firework. It has gradually established a religious-like sacredness among believers. Now, in an instant, the dream is shattered. Can’t you see that you can’t even hear the voice of a miner? Perhaps they are still immersed in the heat of Mingwen and the joy of cashing out their coins.
With the spot ETF in flux, will the power of PoW miners go down in history?
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