Bitcoin Struggles to Rebound as Miner Capitulation Continues 


Keys to take

  • Several reports indicate that Bitcoin miners are selling more coins to cover the cost of their operations.
  • The miners have sold an estimated $ 500 million worth of Bitcoin so far this June, reducing their reserves by nearly a third.
  • Forced sale could stifle any significant recovery for the main cryptocurrency asset.

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According to a recent Coin Metrics report, miners have sold at least $ 500 million in Bitcoin so far this June.

Bitcoin miners sell reserves

The former Bitcoin mining industry has become its worst enemy.

Several reports indicate that Bitcoin miners are selling more coins to cover the cost of their operations. The increase in sales is weighing on any possible recovery of Bitcoin, which leads to more sales as the profitability of miners continues to fall below the cost of production.

A recent report from Arcane’s investigation revealed a significant increase in the amount of Bitcoin that leaves miners ’wallets. “In the first four months of 2022, public mining companies sold 30% of their bitcoin production. The plunging profitability of mining forced these miners to increase their sales rate to more than 100% of their production in May.” , the report states, which indicates that operating costs outweighed the profits of the miners, forcing them to submerge their Bitcoin savings to make up the difference.

Elsewhere, the leading Bitcoin miner Bitfarms has become the latest in a long list of companies to increase their sales amid the record slowdown in cryptography. Bitfarms reported selling 3,000 Bitcoins for $ 62 million over the past week in an attempt to increase its liquidity.

A recent Coin Metrics report also highlighted the current trend of capitulation of miners. The cryptographic analytics firm estimates that miners have sold at least $ 500 million in Bitcoin so far this June, reducing their stocks by nearly a third.

Supply of BTC held by miners. Source: Coin Metrics

Bitcoin hash tapes, an indicator that measures the moving averages of the network’s 30- and 60-day hash rate, also recently moved to capitulation. This indicates that miners are shutting down their machines as it starts to cost more to run them than they can recover with the rewards in bulk.

When the Bitcoin hash rate decreases, the network is programmed to reduce mining difficulty. However, as difficulty adjustments can only occur approximately every two weeks, it may take some time before the network can rebalance with the miners. The last adjustment took place on June 22 and decreased the difficulty by -2.35%.

At the same time, the forced sale of mining companies could stifle any significant recovery for the main cryptocurrency asset. When the price of Bitcoin falls below its average production cost of about $ 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, suppressing its price, preventing a recovery, and trapping them in a vicious circle of sale.

Bitcoin will likely need a major bullish catalyst to break free from its current reduced price range. Until then, miners will have to wait and wait to be able to stay solvent long enough for a recovery to occur.

Disclosure: At the time of writing this piece, the author owned ETH and several other cryptocurrencies.

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