Bitcoin (BTC) miners sold the most in 5 years


The bear market has been going on for a year now. After 365 days of agony and pain in the cryptocurrency market, who still has the energy to sell their BTC? The answer is simple: Bitcoin miners.

The rise in global electricity prices and the depreciation of BTC have made cryptocurrency mining increasingly unprofitable. Retail Bitcoin miners, who were the earliest to suffer from mining costs, had to shut down their rigs some time ago. Meanwhile, the current dips in the price of BTC mean that today even large mining pools have to sell more coins to keep their business going.

In today’s analysis, BeInCrypto looks at Bitcoin Production Costs and Bitcoin Miner Selling Pressure (BMSP) indicators. In addition, we compare them with the recent breakout on the chart of BTC inflows to exchanges and the hashrate of the Bitcoin network.

Why are Bitcoin miners selling?

There are two main reasons why Bitcoin miners are willing to sell their coins. On the one hand, there are huge profits when BTC prices are high. A subsequent sell-off by miners signals a large cryptocurrency market cap and typically occurs during and at the end of a long-term bull market.

On the other hand, the reason for selling could be extremely low BTC prices. These force the Bitcoin mining business to be on the brink of profitability. Bitcoin miners then sell more than usual to cover current business expenses and stay afloat in a bleeding market.

The latter situation is currently observed. On November 9, BTC fell to $15,588. This has caused even the biggest Bitcoin miners with relatively cheap power and the best equipment to experience losses.

One indicator that tracks the profitability levels of the BTC mining sector is the Bitcoin production cost metric @caprioleio. The indicator includes a red band of the BTC price range, below which mining becomes unprofitable.

In the chart below, we can see that a drop from the upper end of the range causes retail Bitcoin miners with the weakest hardware to give up. Currently, this level is around $26,000. In contrast, falling below the lower end of the range causes mining costs to exceed the profits of even the largest miners with the best equipment and lowest energy prices. Currently, this level is around $16,000.

Bitcoin Production Costs / Source: Twitter

This means that the only way to continue mining operations today is to sell the accumulated BTC reserves, with which miners can continue their continuous operations. Such surrenders by miners are usually associated with a bottom in the price of Bitcoin. Most recently, the price of BTC fell below the Bitcoin production cost indicator in May-June 2022 and during the COVID-19 crash in March 2020 (blue circles).

Highest selling pressure in almost 5 years

An indicator related to production costs is Bitcoin Miner Sales Pressure. @caprioleio, the author of this metric, explains that higher values ​​mean higher than usual selling pressure. Conversely, entering the red zone indicates unusually high selling pressure.

On the long-term chart, we can see that today Bitcoin miners are experiencing the highest selling pressure in almost 5 years (blue chart below). The last time the index saw such highs was at the top of the 2017 bull market and the end of the 2018 bear market. In the last period – like today – the Bitcoin Production Cost index reached levels below the group.

Miner Selling Pressure Indicator / Source: Twitter

The analyst adds that the selling pressure indicator “identifies industry stress, oversupply and miner surrender.” He adds that “in some cases, BMSP surrenders before Hash Ribbons.” It should be noted that the latter issued a buy signal at the end of August 2022 after the previous surrender of Bitcoin miners.

Bitcoin miners poured their reserves

Bitcoin miners today face rising production costs and high selling pressure. This leads to the need to leave some of their reserves, increased sales and lower BTC price.

In recent days, we have seen a sharp drop in Bitcoin miners’ reserves. So it appears that the declines due to FUD due to the collapse of FTX were mainly due to miners surrendering.

Source: Twitter

This is confirmed by the chart of inflows to exchanges from known BTC mining pool addresses. The extremely high jump in recent days is attributed to the drop in Bitcoin price.

Source: Twitter

On the other hand, the good news is that despite the difficulties faced by Bitcoin miners, the hash rate of the Bitcoin network remains at a record high. This means that despite the ongoing surrender of miners and low BTC prices, the largest mining pools are still able to keep their rigs running.

With the bad news, hacks, and bankruptcies of many cryptocurrency companies, it’s important to remember that the Bitcoin network has never been as secure and hack-resistant as it is today.

Hashrate of the Bitcoin network / Source: lookintobitcoin.com

For BeInCrypto’s latest Bitcoin (BTC) analysis, Click here.

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