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How the FTX Collapse is Affecting Bitcoin Miners and Bitcoin Mining

Posted by QuoteColo on February 06, 2023 - Updated on February 06, 2023
Blue bitcoin mining container cooling systems

The FTX bankruptcy was one of the latest major crashes in the cryptocurrency space, albeit not its first one. The crypto space has had its share of brokers and companies falling because of inadequacies in their infrastructure. These flaws become even more apparent during a bear market where most crypto prices crash after seeing months of all-time highs.

An interesting area to watch after the FTX collapse is Bitcoin miners, mining colocation and the Bitcoin mining sphere. Here’s what happened after the fall:

The Bitcoin Crash

Following the news that FTX was shutting down, Bitcoin dropped 22% in price within seven days. A lot of it was because of fear that the entire market might be heading even further downhill due to the collapse. The loss of FTX meant that there were a lot of projects that promised funding that would no longer have the funds needed. The funds were false money to begin with, but a lot of other crypto projects suffered as a result.

With Bitcoin’s price crashing, many miners began withdrawing profits as soon as the news broke out. The reason for this was that they wanted to secure a higher price before Bitcoin fell even lower. This allowed them to keep their money stored in stable coins or cash where it will likely be used to keep operations running.

Bitcoin is known to crash significantly during a bear market. News like the FTX collapse become instigators of larger drops, such as the 22% drop in price. Bitcoin has dropped more than 50% from its all-time high, signifying weakness and the potential of an even bigger run during the next bull market.

Why Miners are Selling

Selling Bitcoin helps miners keep much liquidity to keep operations running. Many miners tend to operate at a loss during bear market seasons. They prefer holding most of their assets or selling them immediately to buy lower. One strong argument for selling now is the increasing electricity prices. Inflation has hit numerous industries hard, lining up with when crypto was at its weak point.

The higher energy prices for mining hosting the country faced were a result of numerous events. Higher global inflation, stronger demand, and conflicts in different parts of the world are factors that pushed the price high. Even though many miners operate in the lowest electricity cost areas globally, it’s still a noticeable jump.

Miners now have to sell Bitcoin to keep operations running, as the crypto they accumulate during this time will be worth significantly more in the future. They must also keep mining because in order to keep operations running across different blockchains.

What Happens Now?

Miners selling their Bitcoin to lock in profits isn’t something new. They do this a lot when prices drop because they want to secure a profit from Bitcoin’s price before it drops lower. The crypto they convert will help keep their operations running as they wait for crypto winter to pass. Does this spell the potential end for crypto and Bitcoin? Not likely.

This isn’t the first bear market Bitcoin miners have endured, and it won’t be the last. Companies closing down during this volatile period isn’t something new. In fact, hashrate activity has been increasing in the mining space, indicating a more positive outlook for the future. Many of those who remain and begin building during this period will be stronger when prices rise once more.

Others will say you should stay out of the markets during this period. However, one thing you should notice is how a lot of savvy investors begin placing their money in crypto when no one is talking about it. These people reap the most rewards because they’re buying near the bottom. For now, miners will keep running and wait for the sun to come back up.

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