Bitcoin Miners Show Signs Of Dumping, Bad For Rally?

Keshav Verma

2 years ago

3 mins read

Reason to trust

Strict editorial policy that focuses on accuracy, relevance, and impartiality

Created by industry experts and meticulously reviewed

The highest standards in reporting and publishing

How Our News is Made

Strict editorial policy that focuses on accuracy, relevance, and impartiality

Ad discliamer

Morbi pretium leo et nisl aliquam mollis. Quisque arcu lorem, ultricies quis pellentesque nec, ullamcorper eu odio.

On-chain data shows Bitcoin miners could be dumping right now, a sign that could provide an impedance to the rally.

Bitcoin Miners’ Position Index Has Shot Up Recently

As pointed out by an analyst in a CryptoQuant post, miners may be putting selling pressure on the market currently. The relevant indicator here is the “Miners’ Position Index” (MPI), which measures the ratio between the miner outflows and the 365-day moving average of the same.

The “miner outflows” refer to the total amount of Bitcoin that all these chain validators are transferring out of their wallets at the moment. Usually, miners withdraw coins from their reserves with the main purpose of selling them. Thus, a high value of the outflows can suggest that this cohort is dumping large amounts right now.

As the MPI compares these outflows with their yearly average, the metric’s value can tell us how the current miner selling is compared with the mean for the last 365 days.

When this indicator has a high value, it means miners are selling at a higher degree than usual currently, while the metric having a low value could suggest there is lesser selling pressure coming from these chain validators than the average for the past year.

Now, here is a chart that shows the trend in the Bitcoin MPI over the past year and a half:

The value of the metric seems to have been quite high in recent days | Source: CryptoQuant

As shown in the above graph, the Bitcoin MPI has spiked up recently and has hit a value of about 4, the highest level that the indicator has observed since April of last year. The metric having such a large value would suggest miners are taking out way more coins than usual, and are therefore potentially putting extraordinary selling pressure on the market currently.

From the chart, it’s apparent that spikes in the metric have usually been followed by declines in the price of the crypto. The most extreme example was back in April 2022, when the price saw a very sharp drawdown not too long after the metric recorded even higher values than now.

The last time the indicator observed high values were back during the collapse of the crypto exchange FTX when the price once again saw a rapid downward move.

Bitcoin has been busy rallying during the past week or so, touching as high as $21,000 so far, so these increased withdrawals right now would suggest miners want to take advantage of this profit-taking opportunity while they still can, and dump their coins.

If this cohort indeed intends to sell with these transfers, then the crypto’s rally could possibly find some impedance and temporarily halt here, if not outright reverse its direction.

BTC Price

At the time of writing, Bitcoin is trading around $20,800, up 20% in the last week.

The value of the asset seems to be finding it hard to make a significant break above $21,000 | Source: BTCUSD on TradingView

Featured image from Kanchanara on Unsplash.com, charts from TradingView.com, CryptoQuant.com

Keshav Verma

Keshav is currently a senior writer at NewsBTC and has been attached to the website since June 14, 2021.

Keshav has been writing for many years, first as a hobbyist and later as a freelancer. He has experience working in a variety of niches, even fiction at one point, but the cryptocurrency industry has been the longest he has been attached to.

In terms of official educational qualifications, Keshav holds a bachelor’s degree in Physics from one of the premier institutes of India, the University of Delhi (DU). He started the degree with an aim of eventually making a career in Physics, but the onset of COVID led to a shift in plans. The virus meant that the college classes had to be delivered in the online-mode and with it came free time for him to explore other passions.

Initially only seeking to make some beer money, Keshav unexpectedly landed clients offering real projects, after which there was no looking back. Writing was something he had always enjoyed and to be able to do it for a living was like a dream come true.

Keshav completed his Physics degree in 2022 and has been focusing on his writing career since, but that doesn’t mean his passion for Physics has ended. He eventually plans to re-enter university to obtain a masters degree in the same field, but perhaps only to satiate his own interest rather than for using it as a means to find employment..

Keshav has found blockchain and its concepts fascinating ever since he started going down the rabbit-hole back in 2020. On-chain analysis in particular has been something he likes to research more about, which is why his NewsBTC pieces tend to involve it in some form.

Being of the science background, Keshav likes if concepts are clear and consistent, so he generally explains the indicators he talks about in a bit of detail so that the readers can perhaps come out having understood and learnt something new.

As for hobbies, Keshav is super into football, anime, and videogames. He enjoys football not only as a watcher, but also as a player. For games, Keshav generally tends towards enjoying singleplayer adventures, with EA FC (formerly FIFA) being the only online game he is active in. Though, perhaps due to being ultra-focused on the game, he is today a semi-pro on the EA FC scene, regularly participating in tournaments and sometimes even taking back prize money.

Because of his enthusiasm for anime and games, he also self-learned Japanese along the way to consume some of the untranslated gems out there. The skill didn’t merely remain as just a hobby, either, as he put it to productive use during his exploration for small-time gigs at the start of COVID, fulfilling a couple of Japanese-to-English translation jobs.

Keshav is also big into fitness, with agility and acceleration-related workouts making a big part of his program due to the relevance they have in football. On top of that, he also has a more traditional strength based program for the gym, which he does to maintain an overall fitness level of his body.

Disclaimer: The information found on NewsBTC is for educational purposes only. It does not represent the opinions of NewsBTC on whether to buy, sell or hold any investments and naturally investing carries risks. You are advised to conduct your own research before making any investment decisions. Use information provided on this website entirely at your own risk.