Bitcoin spot ETF is jumping up and down, but miners have nowhere to complain

Spot ETF has not yet arrived, and it has basically shattered the computing power pricing system established by miners for many years.

Written by Zuo Ye

**Will Bitcoin spot ETF be the end of miners? **

As the Bitcoin spot ETF comes and goes, the SEC has successfully captured market sentiment. People’s focus has focused on BlackRock and the long-short war, but the sorrow of the miners has been ignored.

The inscription is hot and the miners make a lot of money

In 2023, in the context of the Bitcoin halving, miners chose to support inscription to increase fee income other than mining. However, the arrival of spot ETFs will not harm the interests of miners in terms of currency prices, and may even help them increase Passive income:

1. With the approval of spot ETF, more traditional investors and individual retail investors can legally purchase Bitcoin, supporting the market price of Bitcoin;
2. Second-layer protocols such as the Lightning Network will be promoted by legalization, and small-amount, high-frequency on-chain activities will continue to increase mainnet handling fees, thus stabilizing the ecosystem.

Unlike when Ethereum switched to PoS, miners were unable to resist, and projects such as ETHW eventually came to nothing. The power of the trinity of Bitcoin mining machine manufacturers + miners + mining pools is not weak. In the past block expansion war and the recent In the Inscription War, miners have no less power over Bitcoin than Bitcoin manufacturers and the core development team.

But in front of asset management giants such as BlackRock, the trillion-level scale of the entire encryption market is not enough. Although Bitcoin miners don’t say it on the surface, judging from the trend of currency holding data, they have spent the past two months in constant selling. Although there are concerns about the overdue approval of ETFs and the good news of price declines, in the long run, miners have become aware of the problem.

**Pricing power will be transferred from the combination of on-chain + miners to off-chain + Wall Street. **

**Pricing power of migration: East–>West, Satoshi Nakamoto–>Miners–>Wall Street? **

**The core of Bitcoin’s pricing power is computing power. **

After the 2021 decision, computing power will inevitably shift to the West, especially the United States. I won’t say more about this. Compared with the geographical distribution, there is the continued concentration of mining pools. Driven by capital efficiency, miners and mining pools have achieved In an alliance, miners still have control of the mining machine, and the mining pool is responsible for daily maintenance. The operating logic is very simple:

Miner income = (mining machine cost - electricity fee - mining pool fee) X number of mining machines X depreciation rate

During the entire bull and bear period, the often-said shutdown price is the most dangerous to mining pools and mining machine manufacturers, because miners will at most suffer floating losses. As long as they last until the bull market, they can always sell their coins to recoup their losses. However, mining machine manufacturers and mining pools did this. It is a service industry that “sells water”. Once it cannot make ends meet, it will face a business crisis.

In essence, miners’ losses are due to the fact that the proceeds from selling coins cannot cover existing expenses, but the majority of actual expenses are only electricity bills. If it is not possible, selling coins will also withdraw part of the funds.

The mining pool is concentrated and the gangsters come ashore

It has been 15 years since the first block of Bitcoin, and it has been about 10 years since Bitcoin used mining machines on a large scale. Although the PoW mechanism left by Satoshi Nakamoto is not environmentally friendly, it has helped miners survive at least 5 rounds of bulls due to its robustness. Bears can be said to be the most meritorious.

The initial miners were not entirely capital games. More of the participants were “gamblers” from the bottom of society, including Internet cafe owners, crypto geeks, and inexplicable pioneers. The roughness and chaos in the early stages of this market created the initial violence. Fu Shenhua, the cost of building a position with micro-strategy is four or five digits, and their cost is even single digits, so they are making huge profits.

But now everything is about to change.

Bitcoin price will be driven by computing power and shift to market + sentiment + Wall Street.

Bitcoin spot ETFs and futures ETFs, and even crypto mining company ETFs, are different, which will essentially change the pricing and operating logic of Bitcoin.

Under the driving force of capital appreciation, the existing Bitcoin chip concentration trend will further deteriorate. Compared with other currencies, the concentration of Bitcoin holdings is already quite dispersed. Adding the huge Bitcoin computing power, it is possible to attack or control the Bitcoin network. The 51% achieved is almost unattainable.

But this is the logic of PoW. If a large number of capital giants pour in, the Bitcoin network will become a PoS mechanism to a certain extent. Of course, this does not mean that the creation of Bitcoin will become a pledge mechanism, but that the chips are too concentrated. Theoretically, spot prices are the basis for pricing derivatives, but in an overly long transmission chain, there is a possibility of imbalance in the adjustment and pricing mechanisms.

You can think back to the subprime mortgage crisis in 2007. Subprime mortgages mean that junk bonds are constantly being packaged and sold based on prerequisites. The initial mortgages no longer have a significant regulatory effect on the market. This situation may be repeated in Bitcoin. objective factor.

The stock is on the shelves, the consortium merges, and the miners die violently, it sounds so pleasant to the ears

Bitcoin still lacks ecology

The popularity of the inscription and the popularity of the second floor are still based on the patchwork of the old mechanism.

The original role of Bitcoin has been repeatedly mentioned, and everyone is impatient when it comes to it - peer-to-peer electronic cash. During the bear market, micro-payment innovations based on the Lightning Network were tried in Latin American countries such as Argentina.

But now, people are picking up the sanctity of Bitcoin but abusing the block space by cramming.

In terms of the popularity of Bitcoin, the number of Bitcoin ATMs and active addresses on the chain has been declining slightly recently. Bitcoin requires physical hardware to physically establish links between people and point-to-point. This may increase with ETFs. And expanded significantly.

In terms of active addresses, Bitcoin has gradually deviated from the psychological expectation of 1 million, showing a strange scene of “on-chain blooming and off-chain fever”. Everyone is talking about Bitcoin, but on the contrary, they are gradually moving away from using Bitcoin. How can an electronic currency circulate if no one uses it?

There is a logical cycle here: lack of ecology leads to no one using it, no one using it leads to a lack of support for currency prices, weak currency prices lead to miners dumping coins, miners selling leads to over-the-counter funds hoarding coins, and over-the-counter funds gradually gain pricing power.

This is essentially the same as burning money to occupy the market on the Internet. As long as you burn money to occupy the market in the early stage, then after obtaining the monopoly market, you can continue to collect “land rent” and eat up the dividends of each industry. , to the merger of taxi-hailing company Kuaidi, this is the case.

Nowadays, under the positive sentiment of ETF, the year-end options of Bitcoin have reached more than 51,000 US dollars, which seriously deviates from the spot market price. The price of Bitcoin has little to do with its role and the computing power of miners. It can be said that it is the biggest Meme Coin, the world is big and the mood is the biggest.

In the blink of an eye, the price of Bitcoin dropped rapidly from US$45,000 to US$40,000, with currency price fluctuations comparable to those of altcoins.

Conclusion: Holiness will definitely go bankrupt

Spot ETFs have not yet arrived, and have basically shattered the computing power pricing system established by miners for many years. People often say that Bitcoin is different from other currencies. It is a unique fireworks, gradually establishing a religious sanctity among believers. , now, once the dream is shattered, dust returns to dust, and you can’t even hear the voice of a miner without you seeing it. Maybe they are still immersed in the heat of the inscriptions and the laughter of cashing out the coins.

Bitcoin spot ETFs can advance and retreat freely, but will the final power of PoW miners just go into history?