Is the Bitcoin Spot ETF the end of miners?

Bitcoin spot ETF has come and gone, the SEC has successfully grasped market sentiment, and people’s focus has focused on BlackRock and the long-short war , but the miners’ grief was ignored.

Inscriptions are hot and miners are making big profits

In 2023, In the context of Bitcoin halving, miners choose to support inscriptions to increase fee income outside of 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 passage of spot ETF, more traditional investors and individual retail investors can legally purchase Bitcoin, supporting the market price of Bitcoin;

2. Layer 2 protocols such as Lightning Network will be promoted by legalization, and small-amount and high-frequency on-chain activities will continue to increase mainnet handling fees , thereby stabilizing the ecology.

Unlike when Ethereum switched to PoS, miners were unable to resist, and projects such as ETHW eventually came to nothing. Bitcoin mining The power of the trinity of machine manufacturers + miners + mining pools is not weak. In previous block expansion wars and the recent inscription war, miners’ dominance over Bitcoin was no less than that of 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 ETF being passed overdue and benefiting from 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, but the opposite of the geographical distribution is the mining industry. With the continued concentration of pools, driven by capital efficiency, miners and mining pools have reached an alliance. Miners still have control over the mining machines, while mining pools are 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-bear period, it is often said that shutdown The price is most dangerous to mining pools and mining machine manufacturers, because miners can only make floating losses at most, and as long as they last until the bull market, they can always sell coins to recoup their costs. However, mining machine manufacturers and mining pools are in the service industry of "selling water". If the revenue cannot meet the expenditure, it will face a business crisis.

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

Mining pools are concentrated and gangsters are coming ashore

15 years since the first block of Bitcoin , Bitcoin has been using mining machines on a large scale for about 10 years. Although the PoW mechanism left by Satoshi Nakamoto is not environmentally friendly, it has helped miners survive at least 5 rounds of bull and bear markets due to its robustness, which can be regarded as a great contribution.

The initial miners were not entirely capital games. More participants were "gamblers" from the bottom of society, including Internet cafe owners, crypto geeks, and An inexplicable pioneer, the roughness and chaos in the early days of this market created the initial apotheosis of sudden wealth. The cost of building a micro-strategy position was four or five figures, and their cost was even single digits. However, they all made huge profits.

But now everything is about to change.

Bitcoin price will be driven by computing power and will turn to be driven by market + emotion + Wall Street.

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

Under the driving force of capital appreciation, the concentration trend of existing Bitcoin chips will further deteriorate. Compared with other currencies, the concentration of Bitcoin holdings has already It is quite decentralized, and combined with the huge computing power of Bitcoin, it is almost impossible to attack or control 51% of the Bitcoin network.

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 some extent. Of course, this does not mean that the creation of Bitcoin will become a PoS mechanism. The pledge mechanism, but the excessive concentration of chips, may cause the opposite effect. In theory, spot is the basis for pricing derivatives, but under an overly long transmission chain, the adjustment and pricing mechanism may be imbalanced.

You can think back to the subprime mortgage crisis in 2007. Subprime mortgages meant that junk bonds were constantly packaged and sold based on prerequisites. The original home loan was Even if it has a significant regulating effect on the market, Bitcoin also has objective conditions for this situation to happen again.

The spot is on the shelves, the consortium is merging, and the miners die violently, how pleasant it sounds

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 has become impatient when it comes to it - peer-to-peer electronic cash. During the bear market, small businesses based on the Lightning Network Premium payment innovation has been tried in Argentina and other Latin American countries.

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

In terms of the popularity of Bitcoin, Bitcoin ATM machines and active addresses on the chain have been declining slightly recently. Bitcoin requires physical hardware to physically Establishing person-to-person, peer-to-peer links may expand significantly with ETFs.

In terms of active addresses, Bitcoin has gradually deviated from the psychological expectation of 1 million, showing a strange scene of "blooming on-chain and off-chain fever". Everyone is talking about Bitcoin. But on the contrary, it is gradually moving away from the use of Bitcoin. How can a currency, 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 throwing coins, miners selling leads to over-the-counter funds hoarding coins, and the market Foreign capital gradually controls 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, you can continue to charge " "Ground rent" has eaten up the dividends of every industry, from the battle of thousands of groups in food delivery to the merger of KuaiDi in taxi-hailing.

Nowadays, under the positive sentiment of ETF, Bitcoin's year-end options have reached more than 51,000 US dollars, seriously deviating from the spot market price. The price of Bitcoin and other The role and the computing power of miners have nothing to do with it. It can be said that it is the largest Meme Coin, with the biggest emotions and the biggest emotions.

In the blink of an eye, the price of Bitcoin dropped rapidly from US$45,000 to US$40,000, and the currency price fluctuations were as large as those of altcoins.

Conclusion: Holiness will definitely go bankrupt

Spot ETF has not yet arrived, and it has basically shattered the work that miners have built over the years. People often say that Bitcoin is different from other currencies in the computing power pricing system. It is a unique firework that has gradually established a religious sanctity among believers. Now, once the dream is shattered, the dust will return to dust, and you will never see it again. , you can't even hear the voice of a miner. Maybe they are still immersed in the heat of the inscriptions and the laughter of cashing out the coins.

Bitcoin spot ETF is advancing and retreating freely, but will the final PoW miner power just go into history?