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How far is the influence of miners on the fall in the price of bitcoin?

Key facts:

Miners mobilize 5.5% of the total funds that enter exchanges.

Binance and Huobi are the largest recipients of transfers from miners.

The activity of bitcoin miners is so little known that it is often surrounded by stories and claims, mostly based on popular beliefs. One of them points out that when these workers sell their funds, they are capable of producing falls in market prices. However, in the 91 report on the state of the network, CoinMetrics found little evidence that miners are responsible for the price drops of bitcoin (BTC).

In its newsletter published this Tuesday, February 23, Coin Metrics states that it is refining its formula for estimating the activity of miners. In order to gain precision, take into account the way in which the wallets that participate in bitcoin mining are structured, and It manages to distinguish the addresses linked to the pools and those that are specific to the miners. A model that has been used since last year to study the behavior of miners in the chain.

Accurately assessing the degree and impact of miners’ sales is crucial to understanding the market, notes analyst Karim Helmy, who signs the document. It compared the deposits that miners make to the total flows handled by exchanges. Based on that, he said that it is clear that the movements of funds of bitcoin workers do not correspond to the falls that the market may suffer.

The flows mobilized by the directorates linked to miners barely represent 5.5% of the total funds that enter exchanges, “And they are not a major source of market volatility,” the report notes.

Miners are natural sellers of cryptocurrencies. This is because they cover their operational costs, such as payment of electricity or rental of facilities, in fiat currency. For that reason, they must sell part of the income obtained in bitcoin, for block rewards and transaction commissions, to remain profitable, as the Coin Metrics newsletter adds.

Binance and Huobi the favorite exchanges of bitcoin miners

In his research Helmy found that miners go to exchanges to sell their funds. However, among the eight exchange houses analyzed, so far, the highlights Binance and Huobi, which are by far the largest recipients of transfers of the miners.

Among the top eight exchanges, bitcoin miners prefer Binance and Huobi to sell part of their profits. Source: Coin Metrics.

That miners prefer Binance and Huobi to sell their funds is no surprise, as they are two exchanges that also operate mining pools. It is also important to bear in mind that they are two platforms with a strong presence in Asia, where most of the miners are located.

On the other hand, the research also looked at the amount of flows entering exchanges from miners and analyzed worker deposits and withdrawals compared to the price of BTC. In that sense, found that there is a low correlation between the flows mobilized by the workers and the price of the queen cryptocurrency.

Helmy’s investigation further determined that miners sell their funds at OTC counters, from Over The Counter, which are operations that do not leave a public record, nor do they alter the market price.

If anything, Coin Metrics adds that while the study provides a solid basis for understanding miners’ behavior, the analysis is still under development. Its objective is to continue adding data that, until now, has not been estimated, such as, for example, the flows of miners to other major exchanges within the market, such as Coinbase.

Another study published by CriptoNoticias last year reveals that 73% of Bitcoin mining pools pay the full reward to miners and use the method to distribute the rewards for mining known as “full pay per share” (FPPS or full page per share). Part of this research highlights the different payment modalities used by pool participants to divide mining profits.