- Several reports indicate that bitcoin miners are selling more coins to cover the cost of their operations.
- Miners have sold an estimated $500 million worth of bitcoin so far in June, reducing their reserves by nearly a third.
- Extortion sales can prevent any meaningful recovery for the top crypto asset.
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According to a recent report by Coin Metrics, miners have sold at least $500 million worth of bitcoins so far in June.
bitcoin miners sell reserves
The ever-growing bitcoin mining industry has become its biggest enemy.
Several reports indicate that bitcoin miners are selling more coins to cover the cost of their operations. Increased sales are weighing on any potential bitcoin recovery, leading to more sales as the miner’s profitability continues to fall below the cost of production.
A recent report from Mysterious Research has revealed a significant increase in the amount of bitcoins leaving miners’ wallets. “In the first four months of 2022, public mining companies sold 30% of their bitcoin production. The falling profitability of mining forced these miners to increase their sales rate to more than 100% of their production in May,” the report said. As read in, it shows that operating costs exceeded the profits of the miners, forcing them to dip into their bitcoin savings. gap.
Elsewhere, major bitcoin miner BitFarms became the latest in a long list of firms to increase their sales amid a record-breaking crypto downswing. Bitfarms reported selling 3,000 bitcoins for $62 million last week to boost its liquidity.
A recent Coin Metrics report also sheds light on the current trend of miners capitulation. The crypto analytics firm estimates that miners have sold at least $500 million worth of bitcoin so far in June, reducing their reserves by nearly a third.
The Bitcoin Hash Ribbon, an indicator that measures the network’s 30-day and 60-day hash rate moving averages, recently flipped to capitulate. This indicates that miners are shutting down their machines because it costs them more to run them than to withdraw from block rewards.
When the bitcoin hash rate drops, the network is programmed to reduce the difficulty of mining. Although difficulty adjustments may only happen approximately every two weeks, it may take some time for the network to reach equilibrium with miners again. The last adjustment took place on 22 June and saw a decrease of -2.35% in difficulty.
At the same time, extortion from mining firms can prevent any meaningful recovery for the top crypto asset. When the price of bitcoin falls below the average production cost of around $30,000 per BTC, miners will continue to sell to maintain their reserves. This could force miners to sell more bitcoin to cover their costs, stifling its price, preventing recovery and trapping them in a vicious cycle.
Bitcoin may need a significant bullish catalyst to break free from its current gloomy price range. Until then, miners will have to wait and hope they can stay solvent long enough for recovery.
Disclosure: At the time of writing this article, the author owned ETH and several other cryptocurrencies.