Bitcoin Mining: Small Miners Serve No Purpose Than Adding Pressure on the Market

• Bitcoin mining is the backbone of the Bitcoin network and with the huge responsibility that comes with bitcoin miners in providing security.
• Often the small bitcoin miners have proven that their non-existence is better for a market as they add in the reduction of pressure and panic.

Bitcoin mining is the backbone of the Bitcoin network and with the huge responsibility that comes with bitcoin miners in providing security, it is obvious why the unbalance created by small miners cannot be unseen. Often the small bitcoin miners have proven that their non-existence is better for a market as they add in the reduction of pressure and panic.

In a series of tweet CEO of Blockware, Matt D’Souse analyzed the consequences of weakening BTC hashrate which is making small miners leave the network.

6) After shutting off, Bitcoin they were receiving is allocated to the more efficient, experienced miners with excellent margins who are positioned to accumulate a larger percentage of the newly minted Bitcoin rather than having to sell it – significantly reducing sell pressure

— Matt D'Souza, CPA (@mjdsouza2) March 26, 2020

While big miners reach a logical understanding and behold their selling, the small miners prove their inefficiency by panic selling their bitcoin holdings. As the prices start to fall off and profitability declines, the small miners naturally panic sell their bitcoin holdings, adding pressure to the market and disturbing the sentiments of the market. When the rate of buying is lower than the rate at which bitcoins are sold, it naturally creates an unbalance in the maintenance of the bitcoin environment.

Bitcoin hashrate Correlation with Bitcoin Price Action

The bitcoin hash on march 28 dropped to 93 exhash per second according to blockchain.com. It declined to a level that small miners were asked to exit.

This continuous disabling of miners led to a drop in the hashrate even faster than the bitcoin rate weakened, collapsing the complexity of mining to a minimum.

Historical data, however, showed that the previous periods of hashrate decline were preceded by an increase in the value of cryptocurrency by 1000% in the next 12 months and by 160% for six months.

Putting light on how small miners cause pressure on the market, the operations of small miners is fully dependent on the price of bitcoin. Even the experts talked that when small miners are exited from the Bitcoin mining operations, the pressure on the market decreases as there would be no more abrupt selling off of their coins.

It is no doubt why it is so necessary for markets to seek big miners who are able to work despite the changes in the value of the coin. Eventually, the ones who reduce panic and pressure on the market. The concern not just being to reduce pressure but to ensure security and the necessary privacy in the blockchain. Thus, Andreas Antonopoulos was right when he said that miners with a long-term and broader perspective are much needed.

Steve Anderrson

Steve Anderson is an Australian crypto enthusiast. He is a specialist in management and trading for over 5 years. Steve has worked as a crypto trader, he loves learning about decentralisation, understanding the true potential of the blockchain.