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Bitcoin Mining Firm Poolin Halts Withdrawals in Liquidity Crunch

·2 min read

(Bloomberg) -- Poolin, one of the largest providers of Bitcoin mining-pool services, has suspended all withdrawals, flash trades and internal transfers within the Beijing-based firm’s system, citing the need to preserve liquidity.

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Bitcoin mining pools are essentially the software that aggregates computing power from miners to increase the probability of winning the token rewards by securing the Bitcoin network. They charge miners a fee for providing the services. The mining process involves millions of powerful computers that compete to be the first to come up with a solution to validate transaction data encrypted by the blockchain and win the Bitcoin rewards for solving the equation.

Mining pool companies have become an integral part of the Bitcoin mining industry. The vast majority of miners, including Marathon Digital Holdings Inc. and Riot Blockchain Inc., use the services since a single miner has a very slim chance of winning the Bitcoin rewards. The miners would rather combine their power and receive a share of the rewards if their pool wins. They can withdraw Bitcoin rewards through a wallet owned by the pool.

“This imperative serves our goal of preserving assets, stabilizing liquidity, and operations in the midst of the dull crypto market, meanwhile, we continue to explore strategic alternatives with various parties,” PoolinWallet said in a Sept. 5 statement.

In general, miners tend to withdraw Bitcoin rewards from the pools’ wallets every 24 hours. However, some mining pool companies incentivize clients to leave the rewards in their wallets for a longer time with lending products, said Ethan Vera, chief operating officer at mining services firm Luxor Technologies, which also has a Bitcoin mining pool.

It is also possible for certain mining pools to lend out their clients’ holdings before they withdraw to maximize profits, Vera said.

Poolin is the sixth-largest Bitcoin mining pool by computing power, according to data from btc.com. The firm also provides services to mine other coins such as Ethereum Classic. Poolin also mines Bitcoin itself. The Chinese firm has seen a significant drop in computing power in its mining pool over the last three days.

The liquidity crunch comes at a time when Poolin is completing the costly process of moving its mining operations to Texas since China banned crypto mining last May.

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