Are the miners of Bitcoin (BTC) responsible for its recent fall?

Are the miners of Bitcoin (BTC) responsible for its recent fall?

3 minutes reading Posted by Clément Wardzala. This article was last updated on 22 January 2021 at 13:52

Has the recent fall of Bitcoin (BTC) below $30,000 been accelerated by the miners‘ action? Over the past few days, outflows from the largest mining pool, F2Pool, have increased considerably. Is this one of the culprits?

Are the miners of Bitcoin (BTC) to blame for its recent fall?

Since Tuesday 19 January, the price of Bitcoin (BTC) began a downward retracement. In just a few days, the price of Bitcoin went from nearly $37,000 to $28,850, its lowest point in 3 weeks.

Although Bitcoin’s performance over the past few months is in no way invalidated, this rapid – and necessary – drop has scared many people off. At the time of writing, Bitcoin Capital has rebounded to $31,500 and the situation seems to be improving.

How do you explain this correction? This question is often complex to answer, as the reasons are varied and often indefinable. While some believe that the drop was caused by market fears about a possible „double spending“ on the Bitcoin network, this is not the case.

Data shared by the analysis firm CryptoQuant reveals that significant outflows from the mining pools have occurred since January 17. More specifically from F2Pool, the largest mining pool comprising about 15% of the total hashrate.

According to CryptoQuant’s CEO, Ki-Young Ju, this rapid increase in the number of BTCs removed from F2Pool’s portfolios could – in part – explain the correction of Bitcoin in the markets.

Since CryptoQuant introduced this indicator in July 2020, this is the first time that F2Pool’s outflows have been so large:

As the graph above shows, F2Pool’s outgoing flows are generally regular. These are necessary for the pool to cover its costs. It is quite normal for a pool to break away from its BTCs, but such an acceleration like the one we have seen in recent days is extremely rare.

A light correction by Grayscale?

Although F2Pool has potentially participated in this descent in the price of Bitcoin, it remains fairly measured. Bitcoin’s fall below $30,000 was rather brief and many investors took the opportunity to reposition their buy orders.

In itself, this retracement of the price of Bitcoin took place over a period of several days. Is this thanks to Grayscale? The asset manager bought more than $600 million in Bitcoin in a single day on January 19.

The same day that F2Pool took a massive amount of BTCs out of its portfolios. Grayscale buys Bitcoin on a regular basis and has been instrumental in keeping Bitcoin at its current rates. Institutionals are no longer willing to give up Bitcoin and continue to buy it.

In its own way, Grayscale and other institutions have probably helped the price of Bitcoin to stay on track. In any case, the indicator of mining pools‘ outflows seems to herald a future trend.

Obviously, F2Pool is not solely responsible for this correction, but has certainly contributed to it. Bitcoin’s price needed a correction to get back on a sound footing and consolidate its long-term uptrend.