In the years and months leading up to the historic transition of the Ethereum blockchain to a more energy efficient system last week, data miners working for a reward on the network have amassed almost $341 million in Ether (ETH).
Today, a week after the merger, cryptocurrency analysts are warning that miners selling their shares could be a source of short-term downward pressure on the price of the cryptocurrency, as the market has already fallen 19% over the past month.
“Miners dumping their ETH is a head start that we will need to overcome over the next few months in order to resume bullish operation, but it will happen,” wrote Lucas Campbell, editor of the Bankless newsletter on Monday.
On-chain data shows that Ethereum miners dumped over 16,000 ETH from September 12 to 19. (OKSlink)
Blockchain data collected by OKLink shows that miners started selling their reserves last week.
Ethereum miners dumped over 16,000 ETH between September 12th and 19th. (The merger went into effect on September 15.) This drop reduced the combined balance of miners to about 245,000 ETH, or about $319 million.
Lucas Outumuro, head of R&D at IntoTheBlock, attributed the drop in balance to “miners moving to other channels. »
According to him, they “make profit from their ETH holdings.”
It’s also possible that some miners sent ether to exchanges to manage an “airdrop” of new tokens from the breakthrough blockchain, which was aimed at continuing the “proof of work” system of the Ethereum blockchain, which is now deprecated, Outumuro said. Since then, these efforts have largely lost momentum.
The price of Ether skyrocketed 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 did happen, the price of the cryptocurrency suddenly plummeted, in what analysts called a “buy the rumor, sell the fact” market reaction.
“If miners were to accumulate Ethereum at a profit, or if they needed to pay their electricity bills, they would have an incentive to sell at a profit, especially given the expected and actual increased volatility,” said Alexander Lores, director of the blockchain market. research in quantum economics.
“For the first time, these miners have no future business relationship with Ethereum,” Lores said.
According to Jeff Dorman, chief investment officer of digital asset management company Arca, it is possible that the movement of miners contributed to lower prices immediately after the merger. On Thursday, the price of Ether was trading around $1,300.
According to Dorman, there is no certainty that all miners will liquidate their assets.
“Perhaps some [mineurs] turn into speculators and seek the best price,” Dorman said. “Perhaps some of them will become stakers and secure the new network, but this activity [de minage] finished. The new network relies on “stakers” — investors who help secure the blockchain by “staking” their ether — instead of the energy-intensive “proof of work” mining that Ethereum has used in the past.
Of course, according to CoinDesk data, the remaining miner assets are only a fraction of the total ETH supply of 119 million.
Former Ethereum miners who decide to continue mining with proof of work can switch to another chain. The prices of the respective altcoins have risen significantly, with Ravencoin (RVN) up 64% over the last 90 days and ETC Ethereum Classic token up 75%.
Chainalysis economist Ethan McMahon said he sees the sale of miners as a “temporary shift” in moving away from Ethereum, “if the original reason miners held Ethereum was for a reserve of value or investment. »
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Passionate about cryptocurrencies and DeFI, Thomas brings international news on the subject!