Why Are Bitcoin Miners Selling Off Their Holdings En Masse?
Bitcoin miners have liquidated a significant portion of their holdings over the past few days. In this article, we will try to find the reasons and tell you how the Bitcoin price behaves.
Miners are in a hurry to get rid of their holdings
The process of asset sell-off is characterized as a bearish event. But the entry of coins into circulation by miners should not be seen as an anomalous phenomenon, as this process happens regularly. Nevertheless, IntoTheBlock data showed that miner supply has declined by more than 20,000 since the beginning of the week, marking a massive wave of selling since April.
Why did miners abandon their habit of accumulation and hurry to get rid of their assets now? There are two significant and interrelated reasons.
Halving or simple profiteering?
Bitcoin miners are in the business of mining the block. For their activity, they receive a reward in the form of Bitcoin. At the moment, this amount is 6.25 BTC for each new block. The deadline for halving the number of newly mined Bitcoins is approaching. Therefore, the amount of reward for miners will also be lowered.
This event is historically a bullish trend signal, because the essence of the halving process is to make Bitcoin scarce. While the reward amount may still seem impressive, miners need funds to cover equipment, electricity, and rent. And that's a lot of money, too.
The bear market of 2022-2023 and the ever-increasing complexity of the mining algorithm, which causes mining companies to buy more complex and expensive to maintain equipment, has led to the bankruptcy of many large mining companies. This is what Core Scientific did, for example. Some have been taken over by larger companies. For example, Riot Blockchain merged with equipment manufacturer ESS Metron. And some were no longer able to pay for the rent of the equipment.
Therefore, the upcoming halving has become one of the reasons why Bitcoin miners are selling off their savings en masse.
Bitcoin performed quite well last week, reaching the $28,000 mark. In addition, the share of total revenue of miners from transaction fees increased. Fearing a possible price drop, miners may have also rushed to liquidate their holdings.
At the time of writing, the major cryptocurrency is trading at $26,815, having failed to consolidate above the resistance level of $27,800. Despite this, analysts are predicting a bullish reversal for Bitcoin in the coming months. They attribute this to the situation surrounding the approval of a spot Bitcoin ETF.
Source & Copyright TradingView
You can read more about what halving is and how it will affect the Bitcoin price in our dedicated article.
Bitcoin mining industry is pivotal
Coming back to the topic of halving, a recent JPMorgan report is worth noting. In the report, the banking giant predicts a drop in the network hashrate after halving. Given the current Bitcoin price, the total value of rewards to miners is $20 billion. This figure has dropped significantly from the $73 billion recorded in 2021.
JPMorgan notes that the upcoming halving will be a tipping point, as inefficient mining equipment will be shut down, which could lead to lower hash rates. Halving and lowering hash rates, as well as the emergence of spot Bitcoin ETFs, could be the catalyst for a Bitcoin rally.
