What happens to the miners' reward coins?

[Jet Cash]

Miners have to cover operating costs, and one obvious way to do this is to sell some or all of the coins they receive for finding blocks. Without sufficient buyers, these sales would depress the price of Bitcoin, if they were sold through the exchanges.  I know of at least one miner who sells his coins to an ATM operator, and that raises the question of who is buying through the ATMs. I suspect that other miners sell directly to large investors and exchanges, and these sales are kept out of the trading stats. There are people buying from exchanges to purchase goods, or for small private investments, but I haven't seen any stats reporting the characteristics or motives of Bitcoin buyers. Does anyone have any links to current analysis reports?

[Herbert2020]

how can there be any "analysis report" when by nature these types of purchases are done privately. for example some investor who directly goes to miners and makes a deal/contract to receive "fresh" coins is doing it to increase their privacy and unless them willingly announce it to the world we can not know anything about it.

[timerland]

Don't think we'll ever see stats for these sorta things, as you said, the block rewards we see from the miners are likely sold in a private deal and from the lack of statistics and volume, it's seeming more and more likely.

Pretty sure they do it privately to avoid dumping bitcoin prices and also helps give them some more privacy. Wonder what other reasons there might be.

[joniboini]

There are people buying from exchanges to purchase goods, or for small private investments, but I haven't seen any stats reporting the characteristics or motives of Bitcoin buyers. Does anyone have any links to current analysis reports?

There is an old survey around that topic, but I don't know how credible the data is[1].

[1] https://lendedu.com/blog/investing-in-bitcoin

[franky1]

the private trades are called OTC trades (over the counter)

motives:
1. avoid causing coins to be put on exchanges to affect prices
     a. imagine selling on an exchange a days worth of coins would impact the price.
         with some pools having 15% of blocks (26 blocks of 12.5=325ccoins) so selling 325coins in one go is enough to change the price
     b. they just dont have time to break it down and just be selling their single blockrewards of 12.5 coins every hour.
     c. they have less control of the price if using public exchanges, no one can predict the public exchange price an hour ahead

2. able to control the price
     a. by having pre-planned contracts for private buyers to buy at $xxxx pools can then know they can cover the electric
     b. by knowing they can cover their bills they can then ensure they put the most electric into the most amount of asics
     c. pools dont react to public prices. instead they have orders pre arranged and controlled.
     d. this is why you dont see smart pools jumping up and down in hashrate every minute a public exchange price changes

3. buyer gets coins at a controlled rate/cost without all the volatility which they would themselves cause if done on public exchanges

4. institutions dont want coins with bad taint and have no clue even when buying on an exchange what taint they will end up with until they hit the withdrawal button. so they want to avoid taint, thus avoid public exchanges.

5. just like buying shares institutions dont want to go around buying little snippets of shares from small share holders. they dont have the time and dont want the hassle and of course they dont want to trigger the rumour mill if news starts going around that they want to buy alot of shares in one go. its better to only deal with big hoarders and do it in private so that the common man doesnt get emotional about news they would hear if it was done publicly

imagine it. most exchanges show orders of 0.001-3btc.. imagine the emotions flare if a public exchange put an order in for 300btc. just seeing a order that size on a public exchange order book becomes a 'wall' in which traders then fight against and switch directions

[ChrisPop]

A usual practice for miners is to sell bitcoin futures contracts to hedge themselves against market volatility and lock in those Bitcoins' value. Regarding the fundamental value that should create pressure on the buy side of the market it is mostly speculative, but think like this: the supply is limited so Bitcoin is a deflationary currency. Second - there are 36 millions millionaires in the world and the maxSupply of BTC is 21 million. Then you have institutions like Bakkt setting up the infrastructure for trading Bitcoin. Banks like JP Morgan and Wells Fargo created their own cryptocurrencies - they see the potential in the blockchain tech. Bitcoin adoption is steadily raising - just heard that over 6000 tobacco shops in France will start accepting it. However at the moment buyers are mostly interested in buying BTC in order to win money by speculating on the price. Halving is approaching ( in May 2020) so there are plenty of reasons for buyers to continue purchasing BTC.

[Jet Cash]

I've seen a few people try to produce these reports by checking wallet addresses, but that seems to be quite difficult, and subject to manipulation. I think the really interesting graph would be the changes in the use of Bitcoin for retail purchases. I've accepted Bitcoin for domain name sales, but it doesn't seem to be very common.

[teosanru]

Well this is what we call anonymity of transactions. This was why BTC was made and this is why they we are soo concerned about illegal activities going around with btc. I know this not any illegal activity. There are absolutely no traces about when these transactions took place or even if they have taken place. Moreover, motives of such bitcoin buyers are pretty straight. As we all know there are not many markets to spend bitcoin so everyone is either holding it to launder their fiat assets into crypto to evade taxes or else they are merely holding it for appreciation in long term. I am clear about the motives but I think there can never be any conclusive reports even if there are they will be more sort of speculative than being based on facts.

[odolvlobo]

I think it is a mistake to assume that OTC trades don't affect the prices on exchanges, and vice-versa. The two markets are not exclusive, and supply and demand in one affects the supply and demand in the other.

[Astvile]

The whole crypto industry will fall but we will never see stats about those transactions, there are reasons why they are doing a private deal obviously to keep it to themselves alone and no information should spread out from both parties.
Private or OTC deals helps miners to cashout instantly the coins reward they have received without affecting the market price, while the buyer benefit from it because he is the one to set the price when deals like this happen.

[CryptoBry]

Miners have to cover operating costs, and one obvious way to do this is to sell some or all of the coins they receive for finding blocks. Without sufficient buyers, these sales would depress the price of Bitcoin, if they were sold through the exchanges.  I know of at least one miner who sells his coins to an ATM operator, and that raises the question of who is buying through the ATMs. I suspect that other miners sell directly to large investors and exchanges, and these sales are kept out of the trading stats. There are people buying from exchanges to purchase goods, or for small private investments, but I haven't seen any stats reporting the characteristics or motives of Bitcoin buyers. Does anyone have any links to current analysis reports?

Private and OTC transactions for Bitcoins are not included in the data coming from many cryptocurrency exchanges hence we could not really determine with certainty the many details of that market especially its size and volume though maybe there can be those who can make some estimates.  Here is a good explanation on the OTC market:

Now, the OTC is a bit different. Here, the buyer and seller are trading directly with each other – no exchange intermediaries, only them and the OTC agents. In this case, when the buyer and the seller manage to agree on a given price at which they are both willing to conclude the transaction, they can settle the deal by paying directly to the other person. In this case, the transaction doesn’t make it onto the market. It is a private deal with increased anonymity and less impact on the actual market price. (Both of these attributes are very important and going to be explained a bit later on when we talk about the possible advantages.)]Now, the OTC is a bit different. Here, the buyer and seller are trading directly with each other – no exchange intermediaries, only them and the OTC agents. In this case, when the buyer and the seller manage to agree on a given price at which they are both willing to conclude the transaction, they can settle the deal by paying directly to the other person. In this case, the transaction doesn’t make it onto the market. It is a private deal with increased anonymity and less impact on the actual market price. (Both of these attributes are very important and going to be explained a bit later on when we talk about the possible advantages.) Source.

I read in some publications that there are times when the price of the Bitcoin can severely be affected when Bitcoin miners decided to unload a chunk of the coins they are holding...which resulted into dumping of the coin value in the market. Maybe if they can choose to do OTC then the impact will not be very visible in the exchanges.

[Jet Cash]

Well miners could dump coins onto an exchange, and open a geared short position just before they do it. That'a an alternative way for them to make money, and repurchase their coins when the price has dropped if they want to keep them.

[yoseph]

I have been wondering whether bitcoin mining has been even profitable at all during these past few days the slump in the values these past few weeks and am talking specifically about those with a few mining rigs. Most miners sell their coins to people who will later resell them at a higher price or they can sell to people who tend to use bitcoins personally.

[franky1]

I think it is a mistake to assume that OTC trades don't affect the prices on exchanges, and vice-versa. The two markets are not exclusive, and supply and demand in one affects the supply and demand in the other.

OTC trades have been happening for years. its not like a recent development which has suddenly changed the equilibrium. it found its niche and markets both otc and public exchange found their balance of supply and demand years ago.

but as i say its not like yesterdays 300btc from a top pool suddenly hits an exchange once the 100th confirm matures the funds. instead thats done off exchange and then later (weeks/months) the recipients have distributed funds even further and into smaller allocations so that by the time those coins do end up on an exchange due to smaller fish rather than a big whale, the funds are spread more thinly and at different times to not cause a drastic impact/walls

lastly. when talking about supply/demand.
exchanges are very bad at displaying supply and demand.
for one, although there are 18mill coins in circulation. recent graphs suggest only 10% of that sit on exchanges. so the supply is never going to be all coins.. nor should it. so never ever think that fresh minted coins should be put onto exchanges. people can hoard coins if they want, and they obviously do. 90% of people are hoarding

as for demand. again exchanges are poor examples. take AML/KYC that paperwork restricts institutions from buying $millions (120 coins+) the liquidity of exchanges is low per user. so dont expect an institution to deposit $3m to try grabbing 360+ coins.  firstly exchanges would have to go through extra paperwork to even allow that, but also by say the 30th btc the price would be rising and by the time they spent the first $1m they would have raised the price significantly that they would not even get a 360btc target. and be just shooting themselves in the foot the more they buy the more the price rises meaning they are getting less coin for their fiat.

[The Sceptical Chymist]

I know of at least one miner who sells his coins to an ATM operator, and that raises the question of who is buying through the ATMs.

That's interesting--I can tell you that I tried to buy bitcoin through an ATM a couple of weeks ago, but the damn thing kept crashing when I tried to scan my ID.  I just wanted to try the damn thing out and didn't want to buy a whole lot of bitcoin at the inflated price that the ATM was selling coins at.  I bet bitcoin ATMs get used a lot, because they're convenient but who knows.  I can't say that for sure.

I don't have any hard data on what miners do with their coins, but I would assume a lot of them have buyers in place off the exchanges--but my guess is that at least some coins get sold on exchanges as well, because it's easy to do, consistent, and they'll always get market prices.  Just because they might do that doesn't mean they'll suppress the price, though.  They don't have to sell everything all at once, for one thing.  For another, the bitcoin market is pretty liquid and can absorb those selling orders pretty easily, especially in good times.

[franky1]

I know of at least one miner who sells his coins to an ATM operator, and that raises the question of who is buying through the ATMs.

That's interesting--I can tell you that I tried to buy bitcoin through an ATM a couple of weeks ago, but the damn thing kept crashing when I tried to scan my ID.  I just wanted to try the damn thing out and didn't want to buy a whole lot of bitcoin at the inflated price that the ATM was selling coins at.  I bet bitcoin ATMs get used a lot, because they're convenient but who knows.  I can't say that for sure.

I don't have any hard data on what miners do with their coins, but I would assume a lot of them have buyers in place off the exchanges--but my guess is that at least some coins get sold on exchanges as well, because it's easy to do, consistent, and they'll always get market prices.  Just because they might do that doesn't mean they'll suppress the price, though.  They don't have to sell everything all at once, for one thing.  For another, the bitcoin market is pretty liquid and can absorb those selling orders pretty easily, especially in good times.

of course the small pools made up of individuals syndicating their hashpower end up taking their slices ofcoin to exchanges,
but thats more about not having the volum/big enough slice of the pie to excite otc traders

but the larger pools that win more often because they are running industrial factory size farms, need to know before wasting electric that they can be sustainable. they cant plan buying new asics and upgrading and paying bills by relying on the whims of the open market.

hense why they preplan days,weeks,months ahead what their growth strategies are going to b and that only happens if they have buyers commiting to valuation contract and by not impacting the open market price which would then harm their 'value' which they privately quote, because if coins become cheaper to buy on an open market instead of otc. then they cant remain sustainable. so ofcourse they are not gonna shoot themselves in the foot for short term gain which would harm long term growth

[gentlemand]

There's been plenty of talk of institutional types paying a premium for 'virgin' coins. If that's true then miners will be your one and only source. If I were a miner selling on an exchange I would consider that a failure on my part to hustle further. If there's any demand out there as a miner you have the most desirable supply.

[Mandoy]

Bitcoin is decentralized and that is why it is hard to gather statistics as to what purpose does the bitcoin buyers why do they buy bitcoins. Also there is no analysis reports, if bitcoin is decentralized who in their right mind will handle that task and who will pay them for doing so. Hence, it is impossible for us to know those things especially those peer to peer transactions. But if you are really interested then you can make some polls to have a rough data and statistics here in this forum, though the accuracy is far off from the real events but at least you can gather some data and have a better understanding about bitcoin transactions.

[cotton ball]

Operating cots very higher and result from mining very lower its why I am not back with mining now, last two years maybe we can get much profit with mining but now better you buy or invest your money in altcoin and bitcoin than you want to start mining project, every day you have pay mining operating from electric to your internet access and many service needed every week for you mining tool, you have much output for you mining tools.

[franky1]

Bitcoin is decentralized and that is why it is hard to gather statistics as to what purpose does the bitcoin buyers why do they buy bitcoins. Also there is no analysis reports, if bitcoin is decentralized who in their right mind will handle that task and who will pay them for doing so. Hence, it is impossible for us to know those things especially those peer to peer transactions. But if you are really interested then you can make some polls to have a rough data and statistics here in this forum, though the accuracy is far off from the real events but at least you can gather some data and have a better understanding about bitcoin transactions.

i guess you miss the fact that blockchain data is clear to see, you can easily see where coins go.
for instance. some pools move coins in large clusters. some make a transaction paying out to lots of little amounts.
its easy to spot differences where say slush pool is paying out to individual hobby miners their small amounts or paying a large player a single large amount
you can then follow the spends to see how long it takes and how many spends it takes to then end up in known exchange cold wallets

add to that when main pool owners do interviews they explain their business models and even laugh when people presume that large pool owners sell on exchanges and be held to the whims of such volatility.

yes the little hobby miners that only earn a few crumbs an hour are too small to even bother investigating, plus their crumbs dont have much impact to b of concern. but the bigger pools do actually talk alot about how sustainable their business models are.

some unrelated stuff i found funny when looking into pools handling of funds.. couple years back the propaganda machine was rampant. there were pools like slush pool who were very vocal about their love of segwit and then the propaganda machine saying btc.com was very much anti-segwit.. funny part is 2 years later and slushpool put their coin rewards on legacy (1) addresses and btc.com put them on segwit(bc1q) addresses
and on unrelated note i still see peter wuille who developed segwit still prefers to accept donations through a legacy address

all im saying is there is quite alot you can actually learn if people actually bother to investigate/research.
too many people still think bitcoin is anonymous and no info can be found about anything..