As the bitcoin market has fallen, so too have Bitcoin mining profits. As the market decline has slowed down, the cash flow from mining rigs has been getting less and less. This led bitcoin miners selling off their assets to pay for their operation costs. However, this issue is not over. There is another problem, and that is that some larger miners might have to liquidate their holdings.
Bitcoin Miners Can’t Meet Up
Bitcoin miners have a reputation for keeping the coins they make from mining. Miners don’t buy the coins, so they are the net sellers of bitcoin. Their tendency to keep these coins means that they often have to sell their possessions to help the markets. They tend to keep the coins until they are no longer bullish and, when profitability is low, will sell them to pay for their operations.
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Similar is the current market situation. Miners have lost more than 70% of bitcoin’s value since November 2021, when it was at its peak. According to reports, public miners have had to sell 30% of the bitcoin they mined in the first quarter of 2022. Miners ended up selling more BTC per month than they had produced in May.
The market was much better in May than June so it’s expected miners will have to increase their selling. Miners would be expected to sell all their BTC for May along with any BTC they had before 2022.
BTC miners are selling their holdings| Source: Arcane Research
Selling off can have many implications
Important to remember that bitcoin miners make up the majority of bitcoin whales. If their holdings are dumped simultaneously, this could make them a significant market player. Together, these miners have 800,000. BTC and the public miner accounts for only 46,000 BTC.
This means that bitcoin’s price would be unable to withstand a massive sell-off if miners of bitcoin reach a wall. It would cause a huge sell-side reaction, which would drive the price down further. This would likely be the eventual low.
BTC price drop forces miners to sell it | Source: BTCUSD on TradingView.com
Public miners’ behavior can indicate if there is a major sell-off. Although these public companies account for only 20% of bitcoin mining activity, it’s possible that they will be forced to go.
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A short-term rebound on bitcoin’s part can help to halt the sell-off. It will be temporary as energy costs continue to rise and certain machines (such as the Antminer S9) have become cash flow negative. In order to weather the downturn, miners could not help but dump BTC.
Featured image taken from Newsweek. Arcane Research charts and TradingView.com charts.
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