A metric that tracks the market share of Bitcoin miners (BTC) turned negative on February 5 for the first time since November, according to him latest report of on-chain data analytics platform Glassnode, setting off an alarm signal for traders.
The net positions of the miners’ balances over 30 days show that they have sold more coins than they have accumulated lately. This could be a sign that some miners are needing to raise capital to meet the costs of their operations, suggests a report from Bloomberg published on Friday.
Throughout the history of Bitcoin, the behavior of the miners has often provided precise indications about the direction of the market. In the retracement of more than 50% of July 2021, the miners played a decisive role in the move that took Bitcoin to lows below $30,000. Or, as Charles Edwards, CEO of asset manager Capriole, recalled in a Cointelegraph Brazil report:
“Bitcoin’s biggest drops were due to miner capitulation (Dec 2018, March 2020), when BTC fell below production costs, there is a risk of miner capitulation” .
current risk
Before and after the latest crash, miners kept adding to their holdings, even as prices hit $35,000, according to a study from Delphi Digital. However, this has started to change.
With Bitcoin still 38% below its recent November all-time high, miners with higher operating costs are starting to feel the pressure of having to deal with their cash balances while needing to invest in more powerful equipment as the hash rate reaches new all-time highs and the difficulty of mining new coins increases.
Shares of the largest mining companies are recovering from recent sell-off lows. Marathon Digital Holdings Inc, Riot Blockchain Inc, Stronghold Digital Mining Inc, and Hut 8 Mining Corp are all up more than 40% from January lows. But the pools of mining with more modest operations they may be making strategic sales.
Heard by the Bloomberg report, the representatives of Marathon and Hut 8 assured that they have taken the diamond hands in the most recent fall. “We started selling in October 2020 and haven’t sold a single satoshi since then,” said Charlie Schumacher, a spokesman for Marathon Digital.
In the same way, Sue Ennis, director of investor relations for Hut 8 Mining, said: “We believe in Bitcoin. Some miners sell Bitcoin or use it to pay their expenses. We keep ours.”
Bitcoin miners located in the United States are booming, especially after the ban on activity in China. Many have been made investments in equipment and alternative energy sources to improve the economic and environmental efficiency of minting new BTC.
However, given the current macroeconomic environment, there is “little room for error” in operational terms to maintain profitable activity this year, as opposed to 2021, said Lucas Pipes, an analyst at B. Riley. “The machines have become much more expensive. If you want to increase your exahash to a certain level, you are going to have to invest 20% to 30% more to achieve it,” he said, referring to the hash rate de Bitcoin.
As Cointelegraph recently reported, the miner production costs hover around $34,000 per BTC. Below that amount, the activity ceases to be profitable. Data on the growth of Bitcoin sales by miners emerged around the same time as the retest of support in this price range on Jan 22-24.
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