In recent months, bitcoin miners have been capitalizing on their extractions by significantly reducing the BTC balance in their wallets in preparation for the long-awaited halving.
This event, approximately scheduled for April 19, 2024, will halve the rewards for validating blocks for miners for the fourth time in the history of the cryptographic protocol, effectively decreasing their revenue.
The same trend can also be observed in the balance sheets of exchanges, where fewer and fewer bitcoins are held in a downtrend that has continued since 2020.
Meanwhile, Wall Street is buying everything the market has to offer, at a rate more than 10 times faster than the creation of new coins.
Let’s see all the details below.
Balance sheet on Bitcoin miners’ wallets at the lowest since July 2021: many sales awaiting the halving
Miners are selling their bitcoins awaiting the execution of the fourth halving in the history of the protocol, which will halve crypto mining proceeds from the current 6.25 BTC to 3.125 BTC per block.
This is nothing new at all: it is well known that miners periodically prepare to liquidate what they have produced.
This does not mean that they do not believe in the future appreciation of the currency, but rather they are somehow “obliged” to capitalize part of the profit to pay some expenses fixed and variable that your business incurs, such as electricity, new hardware, rental locations, employees, etc.
In fact, if we look at the graph “Bitcoin: Balance In Miner Wallets” offered by the on-chain analysis company Glassnode, we can easily see how this trend has clearly been decreasing over the years.
After an initial peak reached in 2012, when Bitcoin and mining were still a nerd pastime, miners have constantly decreased the amount of BTC present in their wallets, going from over 2.5 million coins to the current 1.8 million of units.
In recent months, however, this trend has seen a strong accelerationwith numbers dropping dramatically from November 2023 to the present.
The April halving which will halve the amount of BTC that can be mined every single block will simultaneously increase production costs and certainly affects the willingness of industry insiders to make some cash to prepare for the months following the update.
However, this year there is also the trend in the price action of Bitcoin to consider, which unexpectedly performed much better than in previous cyclesin which no particular increases tend to be recorded in the pre-halving phases.
In this round, however, Bitcoin risks reaching new highs before the well-known four-year event, upsetting all the cards on the table.
Miners most likely took advantage of this situation, selling around 18,000 BTC from November to today, with a current value of over $1.12 billion.
In detail, according to Glassnode data, since the second half of October the bitcoin balance on miners’ wallets has gone from 1.83 million coins to the current 1.812 million, with a decrease of 8,426 BTC (530 million dollars) since January.
In this regard we can report what was recently explained by FRNT Financial, a well-known cryptographic platform based in Toronto, which notes this widespread behavior on the part of those involved in mining cryptocurrencies:
“Miners may also be inclined to sell to better position themselves for the halving. This could involve purchasing more efficient mining equipment due to the new economies the halving will bring.”
Another explanation for the fact that miners are liquidating a large part of their stocks is to be found in the difficulties encountered by miners operators in southwest Chinawhere a dry season has been underway since October which entails higher extraction costs (cooling the hardware alone represents a significant cost).
China currently represents around 20% of the total hashrate on the Bitcoin network, so potentially the sales of Chinese miners have an influence on the numbers of the entire market.
Here too FRNT Financial gives its contribution on the topic, quoting:
“Miners in some regions of China are known to bring additional hardware online during the rainy season, when hydropower becomes plentiful. Presumably, miners could sell during the dry season to counter the downtime of mining hardware.”
BTC balance on cryptocurrency exchanges down since 2020: supply shock coming?
The same trend recorded in miners’ wallets can be observed on the centralized exchange frontwho see their bitcoin stocks constantly decreasing.
Despite this, while miners tend to increase the volume of liquidations in the pre-halving phases, in the case of CEX sales have continued without any particular stopping phases for the past 4 years.
In fact, until mid-2020, thanks to the rise of these platforms as simple solutions for trading and custody of crypto assets, the balance of BTC on exchanges rose dramatically, even exceeding the threshold of 3 million coins.
From that point on however, we have witnessed a in the crypto space trend of emptying coins from centralized exchanges, most of the time ending up in the hands of a few individual holders who rarely move their resources
In a short time, the BTC liquid reserves of these entities have collapsed below the threshold of 2.3 million units and risk falling even further, causing a supply shock in the price of the crypto.
More and more retail, private companies and institutions want to buy Bitcoin but if the trend remains in the coming months, probably it will be difficult to satisfy the large amount of demand that usually arrives in the post-halving monthscausing a surge in prices.
Spot ETFs on Wall Street play an important role in this context as they are mainly responsible for the huge purchases recorded since the beginning of the year.
Think about that currently the various BlackRock, Fidelity, Ark and company generate daily bitcoin inflows into their funds 10 times greater than the quantity of coins created daily by miners.
However, these entities generally do not carry out spot purchases, both due to the negative effect on their average purchase price and because it is an efficient practice: their reference markets are usually OTC desks and direct contacts with miners and large holders.
Lately, however, a “problem” has been emerging for Fund Managers who have to purchase Bitcoin for their clients.
The OTC desks, from which they purchase large sums of crypto every day, have reached the lowest balance levels of the last 6 years and are running out of their stocks, leaving the spot markets as the last chance to execute operations.
If Wall Street ever flocks to the Coinbase, Kraken, and Gemini markets in the coming months, we could expect one hot price action for bitcoindriven by a supply shock that would cause prices to skyrocket.
Ladies and gentlemen, fasten your seatbelts.
Source: https://cryptonomist.ch/2024/02/29/miner-vendita-bitcoin-halving/
