In the years and months leading up to the Ethereum blockchain’s historic switch to a more energy-efficient system last week, data miners working for bounties on the network had amassed nearly $341 million worth of ether cryptocurrency (ETH ).
Today, a week after the merger, cryptocurrency analysts are warning that miners selling their shares could become a source of short-term downward pressure on the cryptocurrency price as the market is down 19% in the last month.
“Miners dumping their ETH is a glut that we will have to overcome in the coming months to resume the bullish mode of operation, but it will happen,” Bankless newsletter editor Lucas Campbell wrote on Monday.
On-chain data shows that Ethereum miners downloaded more than 16,000 ETH from September 12-19. (OKLink)
Blockchain data collected by OKLink appears to show that miners began selling their reserves over the past week.
Ethereum miners dumped more than 16,000 ETH between September 12 and 19. (The merger went into effect on September 15.) This drop reduced the miners’ combined balance to around 245,000 ETH, or around $319 million worth.
Lucas Outumuro, head of research at IntoTheBlock, attributed the drop in balances to “miners moving to other channels. »
They are “making a profit on their ETH holdings,” he said.
It is also possible that some miners sent ether to exchanges to manage an “airdrop” of new tokens from an emerging blockchain that was intended to continue the now-discontinued Ethereum blockchain’s “proof-of-work” system, Outumuro said. Since then, this effort has largely lost momentum.
The price of Ether soared in the weeks leading up to the merger as some traders also fought for the airdrop, while others speculated that the move could lead to more institutional investment. But when the merger actually took place, the price of the cryptocurrency suddenly plummeted, in what analysts called a “buy the rumour, sell the fact” market reaction.
“If miners had been accumulating Ethereum at a profit, or if they had to pay their electricity bill, they would have an incentive to sell at a profit, especially with the expected and actual increase in volatility,” said Alexandre Lores, director of blockchain market. research in Quantum Economics.
“For the first time, these miners do not have a future business relationship with Ethereum,” said Lores.
The movement of miners may have contributed to the immediate post-merger price weakness, according to Jeff Dorman, chief investment officer at digital asset management firm Arca. Ether price was trading around $1,300 on Thursday.
It’s not certain that all miners will liquidate their holdings, Dorman said.
“Perhaps some [mineurs] they will become speculators and hold on to a better price,” Dorman said. “Perhaps some will become stakers and secure the new network, but this activity [de minage] finished. The new network is based on “stakes,” investors who help secure the blockchain by “staking” their ether, rather than the energy-intensive “proof-of-work” mining that Ethereum previously used.
Of course, the remaining mining farms are only a fraction of the total ETH supply of 119 million, according to data from CoinDesk.
Former Ethereum miners who choose to continue with proof-of-work mining can switch to another chain. Related altcoin prices have seen a significant increase, with Ravencoin (RVN) up 64% and Ethereum Classic ETC token up 75% over the past 90 days.
Chainalysis economist Ethan McMahon said he sees the miner sale as “a temporary switch” away from Ethereum, “if the original reason miners held Ethereum was for store of value or investment.” »
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