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Home Cryptocurrency news Bitcoin

Bitcoin Miners Largely Responsible For Latest Rejection At $10K

Tony Spilotro by Tony Spilotro
10 months ago
in Bitcoin
Reading Time: 3min read
bitcoin miner selloff
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Bitcoin price has been consolidating in the mid to high $9,000 range for nearly a month and a half. Repeated attempts to break and hold above $10,000 have been rejected thus far.

The most recent rejection, data shows, was largely fueled by miners who were seen moving BTC supply to exchanges just ahead of the most recent steep selloff. Is this miners capitulating, or simply taking advantage of high prices each time the cryptocurrency reaches the key resistance level?

Are Miners Responsible For The Latest Crypto Market Selloff?

In early 2020, Bitcoin and other cryptocurrencies went on strong rallies from lows set in the year prior.

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All signs had been pointing to a new uptrend forming. Indicators had been supporting the incredibly bullish sentiment and price action.

Bitcoin price began to cool off after a visit above $10,000, but then the black swan impact of the pandemic struck financial markets, and all bullish price action leading up to the high was erased in under 48 hours.

The carnage is now referred to as Black Thursday.

Related Reading | Bitcoin Slides As Greater Financial Market Is a Sea of Red, How Far Will BTC Drop? 

From the extreme panic low, Bitcoin price has grown over 140% and revisited above $10,000 numerous times.

Each time it’s pushed above the powerful resistance level, it has led to a strong rejection, the last of which, data indicates may have been driven by Bitcoin miners.

But why the sudden surge in selling post-halving? According to theories related to the halving, miners should be holding any new BTC mined not selling, so why is the inverse now happening?

Maybe miners did dump on us.#bitcoin pic.twitter.com/7WL3f8i3Lt

— Byzantine General (@ByzGeneral) June 13, 2020

Miner Capitulation And Competition May Be Purposely Pushing Bitcoin Prices Lower

Data analyzing the amount of BTC supply mining pools hold flowing into cryptocurrency exchanges shows an especially large movement preceding the most recent crash in Bitcoin price.

Speculation suggests that this Bitcoin was later market sold, causing the price of the asset to drop as a result.

Miners have been long expected to hold newly mined BTC post-halving, throwing off supply and demand, which could cause the start of a new uptrend in the digitally scarce asset.

Instead, however, miners have been selling even more BTC, even tapping into reserves.

While the halving could ultimately have the expected effect on the price per BTC, it may first require the weakest mining participants to capitulate and close up shop for good.

This also may be what is happening, according to the data, and a surge in miners moving funds to exchanges.

Miner profit margins live and die by the market value of Bitcoin versus the cost of production. When Bitcoin price heavily outweighs energy and operating costs, mining is extremely profitable.

But for miners who don’t have access to cheap energy, or aren’t large enough for the efficiency needed for profitability, the halving may have destroyed any chance of having a surviving business model.

Because the halving immediately reduced the block reward miners receive for securing the network from 12.5 BTC to just 6.25 BTC, the cost of production doubled instantly also.

This has put the weakest miners at a strong disadvantage due to Bitcoin price remaining under $10,000.

bitcoin hash ribbons miners

Indicators measuring the health of the Bitcoin network point to miners capitulating due to the substantial blow to profit margins. If Bitcoin price drops lower, miners may have zero choice but to sell or suffer major losses.

Another theory is that it is actually the strongest miners selling in an attempt to force the capitulation of the weakest miners by pushing prices lower.

Related Reading | Bitcoin Miner Capitulation Reaches Black Thursday Levels, Is A Severe Selloff Looming?

A temporary hit to their own, currently sustainable margins, could eliminate the competition for them for years to come.

Whatever the reason for the selling, it isn’t necessarily bearish for Bitcoin. The more weak miners are cleansed from the network, the healthier mining pools will be and the more likely they will be to hold BTC supply for later mark up during the next bull market.

Tags: bitcoinbtcusdBTCUSDTcryptominersxbtusd
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Tony Spilotro

Tony Spilotro

I'm Tony Spilotro. Behind the pseudonym, I'm a global remote work leader with a decade of award-winning content experience and excellence. Here, I explore my newfound passions pertaining to privacy, finance, economics, politics, cryptography, property rights, and other libertarian-esque views. I am a Bitcoin evangelist, maximalist, and educator whenever I can be, helping to spread its message of freedom from government control, monetary policy mismanagement, and passing the buck - literally – to future generations. My journey from a curious retail crypto investor to a serious Bitcoin advocate, trader, and technical analyst is an unusual one, but life-changing nonetheless and has become less about money and more about a long-overdue revolution. While a firm believer in the laws governing math and science, I am profoundly fascinated by the impact of astrology and astronomy including moon and solar cycles and planetary alignment and their ability to influence and potentially predict markets. It hasn't yet clicked for me as to how to put anything to use, but I consider it my current rabbit hole I can't yet dig out of. My perspective of growing up alongside the internet, the dot com era, the Great Recession, and roots in video games collecting coins and rare items caused Bitcoin to immediately make sense to me. Through all of these lenses, I seek to produce content that is educational and entertaining, and I thank you sincerely for taking the time to read what I have to say. Please follow me on Twitter and feel free to drop me a line if you would like to work together.

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