Over the last few weeks, bitcoin (BTC) has failed to benefit from a favorable macroeconomic climate that has triggered significant rallies in equities.
Analysts attribute this to supply overhang stemming from prolonged selling by BTC investors and miners. However, the tide may soon change as selling pressure from Bitcoin miners is decreasing.
According to the latest Bitfinex Alpha report, the volume of BTC transferred from miners’ wallets has slumped significantly, suggesting potential stabilization. Analysts said such a development is positive for bitcoin’s price, and the cryptocurrency may soon resume its upward trend.
Bitcoin Miner Selling Pressure Plummets
Since the Bitcoin halving in April, miner revenue has been slashed in half. As older miner machines became economically inefficient due to higher operational costs, miners have had to liquidate their Bitcoin holdings to stay afloat. These entities have sold their assets through over-the-counter transactions and in the open market to sustain their operations.
Although the crypto market appears to be adjusting to the increased sell-off, the frequency and volume of bitcoins moving out of miners’ wallets have declined. Once the market fully absorbs the selling volume, the chances of an upward rally increase; hence, the reduction in miner selling pressure is a positive development.
Interestingly, market participants speculate that old miners’ buying/selling patterns currently have no relevance to prices; however, recent historical patterns say otherwise.
Bitfinex analysts identified similar miner sell-offs that impacted market prices from May to September 2023 and December 2023 to January 2024. Bitcoin resumed its northward movement once the selling pressures diminished during those periods.
“With the hashrate drawdown reaching levels last seen at the 2022 bear market lows, it would be a valid conclusion that we are past the peak of the mining selling pressure for the time being, and a lot of the weaker miners have already capitulated,” the analysts added.
Near-term Outlook Still Vulnerable
Despite the decline in miner selling pressure, other supply overhangs from large-scale selling by long-term holders continue to influence the market. The German government has been on a selling spree in the past weeks, while coins from the defunct crypto exchange Mt Gox have been moving.
Coupled with renewed profit-taking by other long-term Bitcoin holders, German law enforcement’s offloading of BTC signals that the near-term outlook is vulnerable and BTC could experience more volatility.