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Bitcoin Miner Liquidation Threatens Bitcoin’s Recovery

Bitcoin Miner Liquidation Threatens Bitcoin’s Recovery

Bitcoin mining profitability is falling along with the market downturn. Cash flow from mining equipment has become increasingly blocked over time, forcing bitcoin miners to sell their holdings to cover the cost of their operations. But as raging as it is, there is a larger issue that could threaten BTC’s recovery so far, which is the fact that large miners may be forced to liquidate their holdings.

Can’t find bitcoin miners

Generally, bitcoin miners are known to keep the coins they realize from their activities. Since miners are not buying coins first, this makes them natural net sellers of bitcoin. However, his propensity to keep these coins has often seen him unloading his bags in afflicted markets. So instead of actually selling in a bull, they hold on until the bull market is over and as profitability decreases in a bear market, they are forced to sell coins to finance their operations. There are.

Related Reading | Bitcoin’s Recovery From Celsius Liquidation Is Out, But For How Long?

The same situation is going on in the market. With bitcoin down more than 70% from its all-time high, miners are nowhere near as profitable as they were in November 2021. In the first four months of 2022, it is reported that public mining companies have had to shut down almost 30% of their BTC from mining. This means 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 much better than in June, expect miners to ramp up sales. This would be the possibility for miners to sell off all their BTC production for the month along with the BTC they already had before 2022.

BTC miners selling off holdings | Source: Arcane Research

implications of a sell

It is important to note that bitcoin miners are the largest bitcoin whales in the space. This means that their holdings have the potential to be a major market mover when dumped at the same time. These miners collectively hold 800,000 BTC and the public miners account for only 46,000 BTC of that number.

This means that if bitcoin miners are pushed to the wall, where it triggers a massive sell-off, the price of the digital asset will have a harder time holding against it. This will create massive selling pressure which will push the price further down, possibly causing such an event to touch its final bottom.

Declining prices forcing miners to selling BTC | Source: BTCUSD on TradingView.com

The behavior of public miners can often help indicate whether a massive sell-off is imminent. These public companies account for only 20% of all bitcoin mining hashrate, but if they are forced to sell, it is likely that private miners are being forced to sell.

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A short-term recovery on the part of Bitcoin could set off this sell-off. However, this will only be a short-term relief as energy costs have stagnated and some machines, namely the Antminer S9, have now turned cash-flow negative. To survive the bear market, miners will have no choice but to dump some BTC to weather the storm.

Featured image from Newsweek, charts from Arcane Research and TradingView.com

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Bitcoin Miner Liquidation Threatens Bitcoin’s Recovery

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