Bitcoin Miner Liquidations Threaten Bitcoin’s Recovery
June 22 2022 - 1:00PM
NEWSBTC
Bitcoin mining profitability has been dropping along with the
market decline. The cash flow from the mining rigs has become
increasingly stunted over time, causing bitcoin miners to begin
selling their holdings to cover the cost of their operations. But
even as this rages on, there is a bigger issue that could threaten
the recovery that BTC has made so far, which is the fact that
larger miners may be forced to liquidate their holdings. Bitcoin
Miners Can’t Meet Up Usually, bitcoin miners are known for holding
the coins that they realize from their activities. Since miners are
not buying the coins in the first place, it makes them the natural
net sellers of bitcoin. However, their tendency to hold these coins
has often seen them having to offload their bags onto suffering
markets. So instead of actually selling in a bull, they tend to
hold until the bull market is over and with profitability down in a
bear market, are forced to sell coins to finance their operations.
Related Reading | Bitcoin Recovery Wades Off Celsius
Liquidation, But For How Long? The same is the scenario that is
currently playing out in the market. With bitcoin more than 70%
down from its all-time high value, miners are nowhere close to as
profitable as they were back in November 2021. In the first four
months of 2022, it is reported that public mining companies have
had to offload about 30% of their BTC gotta from mining. This meant
that the miners were having to sell more BTC than they were
producing in the month of May. Given that the market in May was
significantly better than in June, it is expected that the miners
would have to ramp up selling. This would likely see miners selling
all of their BTC production for the month alongside the BTC that
they already held prior to 2022. BTC miners selling off holdings |
Source: Arcane Research Implications Of A Sell-Off It is important
to note that bitcoin miners are some of the largest bitcoin whales
in the space. This means that their holdings have the potential of
being a major market mover when dumped at the same time. These
miners hold as large as 800,000 BTC collectively with public miners
accounting for just 46,000 BTC of that number. What this
means is that if bitcoin miners are pushed to the wall where it
triggers a mass sell-off, the price of the digital asset would have
a hard time holding up against it. The massive sell-side pressure
it would create would push the price further down, likely being the
event that would see it touch its eventual bottom. Declining prices
forcing miners to selling BTC | Source: BTCUSD on TradingView.com
The behaviors of the public miners can often help point to if a
massive sell-off is imminent. These public companies only account
for about 20% of all bitcoin mining hashrate but if they are forced
to sell, then it is likely that private miners are being forced to
sell. Related Reading | Gold Proves To Be A Safe Haven
Asset Amid Bitcoin Crash Short-term recovery on the part of bitcoin
can push back this sell-off. However, it will only be a short-lived
reprieve as energy costs are constant and some machines, namely the
Antminer S9, have now become cash-flow negative. To survive the
bear market, miners would simply have no choice but to dump some
BTC to weather the storm. Featured image from Newsweek, charts from
Arcane Research and TradingView.com Follow Best Owie on Twitter for
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