The topcryptocurrency is facing increased selling pressure as miners dump their coins to stay solvent.
The central theses
Several reports indicate that miners are selling more coins to cover the costs of their operations.
- Miners have so far in June Bitcoin sold an estimated $500 million and shrunk their inventories by nearly a third.
- The forced sale could stifle any meaningful recovery for the top crypto asset.
According to a recent report by Coin Metrics, miners have sold at least $500 million worth of bitcoin so far in June
Bitcoin miners sell reserves
The once booming Bitcoin mining-Industry has become its own worst enemy. Several reports indicate that bitcoin miners are selling more coins to cover the costs of their operations. The increased selling is weighing on any potential Bitcoin recovery, leading to more selling as miners’ profitability continues to fall below production costs. A recent report by Arcane Research has shown a significant increase in the amount of bitcoin leaving miners’ wallets. “In the first four months of 2022, public mining companies have sold 30% of their Bitcoin production. Declining mining profitability forced these miners to increase their sales rate to more than 100% of their production in May,” the report states, noting that operating costs exceeded miners’ profits, forcing them into their bitcoin -Dive into savings to make up the difference. Elsewhere, leading bitcoin miner Bitfarms became the latest in a long list of companies boosting sales amid the record-breaking crypto downturn. Bitfarms reported selling 3,000 Bitcoin for $62 million last week to boost its liquidity. A recent Coin Metrics report also highlighted the current trend of miner capitulation. The crypto analytics firm estimates that miners have sold at least $500 million worth of bitcoin so far in June, reducing their inventories by nearly a third. BTC stash held by miners
BTC stash owned by miners. Source: Coin Metrics
The Bitcoin Hash Ribbons, an indicator that measures the moving averages of the network’s 30-day and 60-day hash rates, also recently tipped into capitulation. This signals that miners are shutting down their machines as it costs more to operate than they can recoup from block rewards. When the Bitcoin hash rate goes down, the network is programmed to decrease the mining difficulty. However, since difficulty adjustments can only occur about every two weeks, it may take some time for the network to regain equilibrium with miners. The last adjustment took place on June 22nd and reduced the difficulty by -2.35%.At the same time, the forced sale of mining companies could stifle any significant recovery in the top crypto asset. If Bitcoin’s price is below the average cost of production of around $30,000 per BTC, miners will continue to sell their reserves to stay afloat. This could force miners to sell more bitcoin to cover their costs, depressing the price, preventing a recovery and trapping them in a vicious cycle of selling. Bitcoin will likely need a significant bullish catalyst to break out of its current low price range. Until then, miners will have to wait and hope they remain solvent long enough for a recovery to occur.
Source: Crypto News Deutsch