The price of the largest cryptocurrency Bitcoin (BTC) is showing strength following the approval of 11 spot Bitcoin ETFs by the U.S. Securities and Exchange Commission (SEC) and the commencement of trading for these ETFs. The detection of miners liquidating their BTC holdings during this period has caused widespread fear in the market.
Miners Transfer $1 Billion Worth of BTC to Exchanges
On-chain data platform CryptoQuant reported that miners have been liquidating their BTC holdings and miner outflows have exceeded $1 billion, reaching the highest levels in recent years.
Data indicates that the majority of the liquidated BTC was moved from mining company F2Pool to cryptocurrency exchanges. Analyst Bradley Park from the company, in a Telegram message to CoinDesk, stated that this activity is a result of the miners’ increasing costs. Park pointed to the need for miners to upgrade to Bitmain’s latest Antminer T21 ahead of the fourth block reward halving, which will decrease rewards and thus the efficiency per machine, especially for F2Pool which has moved to Kazakhstan.
Moreover, it has been reported that F2Pool‘s hashrate has already started to increase, indicating that they have begun to expand their capacity. Hashrate is a measure of the computing power of a group or individual on a Blockchain network.
Miners use extensive computational resources to verify transactions on Blockchain networks and to protect Proof of Work (PoW) networks such as Bitcoin. Most of the miners’ income typically comes from rewards automatically given in the form of coins/tokens by the networks they mine on.
Miner Outflows and Bitcoin’s Price
Historically, increases in miner outflows to cryptocurrency exchanges often precede price drops. This suggests that the recent surge in mining outflows could indicate a potential drop in Bitcoin’s price. However, there is no definitive correlation between mining outflows and price, and not all increases in outflows result in a drop. While increases in miner outflows have led to price drops in the past, there are also instances like in August 2019 where the price of Bitcoin rose despite increased outflows.
Currently, analysts are evaluating that the recent increase in miner outflows is not a strong signal of a significant drop, given the listing and commencement of trading of the first U.S. spot Bitcoin ETFs on the exchange.
