Introduction
Earlier this month the Bitcoin mining company Cipher announced its becoming a public company. I believe miners going public may have drastic consequences on the price action of Bitcoin.
Bitcoin miners make money by selling the bitcoins they mine. That is their only source of income. As private companies, their ability to draw capital investment are more limited than as public companies traded on the stock markets. A stock market listing will enable a Bitcoin miner to tap into much deeper pool of capital investment. What that could mean is less dependence on the short-term price of Bitcoin.
Why is that relevant to the price action of Bitcoin?
Over the course of the last decade it has become increasingly clear that Bitcoin's price action is driven by the mining reward halvings every four years that instantly double the stock-to-flow ratio of Bitcoin, thus increasing its scarcity and leading to a flurry of speculative action and a massive bull market. This is drive by the smaller amount of bitcoins sold by miners on a regular basis.
The four-year cycles could be dampened
But what if miners with much deeper pockets are able to better time when they sell their coins? It stands to reason that the four-year cycles would be dampened. No more insane blow-off tops driven by drastically increased scarcity brought about by the halvings, impacting the markets with a delay of 12-18 months. And no more 70-80% crashes during the subsequent bear markets.
Will the market become a more stable and mature one?
The big question is whether this will cause the entire space to become a more stable one thus increasing the inflow of capital into it. Or will it lose a fair degree of predictability owing to the loss of such distinct four-year cycles.