Poolin just froze BTC withdrawals...here's what that means.
Uh-oh, this isn't great.
Poolin, one of the world’s largest Bitcoin mining pools, just announced that it would freeze withdrawals from its Pool Account.
First, let’s explain who Poolin are and what the heck a mining pool is.
Poolin is a Beijing-based company. They let Bitcoin miners join forces, pool their computing power, and mine BTC more effectively together.
More miners = more mining power = a higher chance of successfully mining each block of Bitcoin (and making mooooney baaaaby!).
Poolin are kind of a big deal…
They’re responsible for 10% of the overall Bitcoin network hashrate (which is essentially a measure of the total amount of computing power currently connected to the Bitcoin network).
Right - so, earlier this week Poolin released a statement saying that, due to liquidity issues, they’d no longer allow their users to withdraw funds from the mining pool.
Translation: "Y'all are trying to pull too much BTC from our accounts, all at once - we don't have enough in reserve to meet the demand!"
Even worse, in the announcement they focused on a promotion that would allow new contributors zero fees for their contribution to the pools and left it to the very end to announce the withdrawal freeze.
'Hey, we won't charge you any fees...but you won't be able to collect your earnings' doesn't exactly inspire confidence in contributors.
While the company is still operating and intends to make another update on their plans within two weeks - it’s not a great look.
First: it doesn’t set a good precedent. If companies can simply freeze withdrawals any time they get low on cash, it reduces confidence in investors.
(Imagine a bank saying: “Nah you can’t withdraw your money today, try again in two weeks”).
Second: on a broader scale, the reason for the reduction in Poolin’s liquidity is that there was a rise in demand for withdrawals.
...withdrawals happen when miners are getting ready to sell Bitcoin. This increase could indicate they believe BTC is about to lose value.
Not great! But that's how things go in a bear market.