Bitcoin has seen the biggest selling pressure from miners in the last 7 years and mining companies struggle with a predatory business and high cost of mining.
Increased selling pressure from bitcoin miners
Analyst and trader Charles Edwards (@capriole), founder of the fund @capriole_fund, posted on Twitter that the market has seen the greatest selling pressure from bitcoin miners in the last seven years. Marking a 394.27% increase in selling pressure in just three weeks.
According to Charles Edwards: “It is a bloodbath of Bitcoin miners.” and completed: “If the price doesn’t go up soon, we’ll see a lot of Bitcoin miners out of the market.”
This is because, according to bitcoin mining data, miners are currently operating at a loss. What characterizes the selling pressure as a capitulation movement, which results in this “bloodbath” and ends up killing companies with less capacity to raise capital through rounds of investments or loans.
The founder of Capriole claims that this is caused by an unsustainable strategy applied by many miners in the bull market: “mine and hold”, avoiding making partial sales that would help build a healthier cash flow for times of crisis.
Part of the incentive for not selling BTC on a regular basis is to avoid creating a selling pressure that can offer a counterweight to the price hike, which is difficult to do with bitcoin’s famous “pumps”.
However, by employing the more natural strategy of partial sales, miners also lessen the effects of capitulation and, consequently, the bear market. The same strategy that is used to enable large “pumps” that generate “FOMO” in the market, ends up being one of the causes of large “dips” that generate “FUD”. A balanced strategy would also bring more balanced price dynamics, both upwards and downwards.
The market needs to mature and understand that inflation in bitcoin, which occurs from the distribution of new coins through mining, is something that is part of the asset’s economy and will always exert some kind of selling pressure against demand.
Mining cost generates losses in the activity
On Sunday, Bitcoin’s difficulty increased by 0.51% at block 764,064, and the increase took the difficulty to an all-time high of 36.95 trillion. After this difficulty transition, the data shows that the overall global hashrate dropped from 317 exahash per second (EH/s) to 233 EH/s.
The hashrate is currently at 250.59 EH/s according to coinwarz.com logs.
Statistics from November 21, 2022 show that the cost of producing bitcoin is much higher than the spot market value of BTC in dollars. Metrics recorded by macromicro.me indicate that the average mining cost is $22,583 today, while the dollar value of BTC is recorded at a nominal $16,078 USD per unit.
Which means that each new BTC distributed generates around $6,505 worth of loss at current data. When considering that approximately every 10 minutes 6.25 BTC is distributed, that’s $40,656.25 of loss/10min, resulting in around $243 million dollars lost per hour among miners.
This value fluctuates and adjusts according to mining difficulty or hashrate dynamics, but the loss scenario stretches over weeks without correction.
Know more: BTC Hashrate Hits All-Time High, Miner Revenues Low
The consequences are inevitably network centralization over time, loss of security (hashrate drop) and more capitulation by miners unless the price goes up.