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New Data Shows Miners Selling More BTC Than They Earn, But It’s Still Not Capitulation

While an event as major as the Bitcoin halving was set to have a significant impact on mining, few could agree on how long it would take before the first consequences of reducing the block rewards by half would show on the market. Some argued that the impact of a reduced block reward would decimate the less profitable miners within days, forcing them to shut down operations or switch to more profitable cryptocurrencies. Others claimed that the effects of the halving wouldn’t be seen immediately, taking weeks or even months to manifest. 

It’s been almost a month since the halving and it’s hard to say which of the two predictions were right – the halving’s effects on Bitcoin hashrate were visible almost immediately, but other consequences also seem to be manifesting in the weeks that followed. Some analysis have found that miners might be struggling to stay afloat and cover their costs, which is the type of data that goes to support the latter theory. 

According to on-chain analysis company ByteTree, last week seems to have been especially hard for miners, as data revealed that they sold 11% more coins that they generated over the same period. The company tracks Bitcoin wallets associated with miners in order to determine the operation’s general profitability. And while ByteTree’s metric might not be reflective of the mining industry as a whole, it offers an important perspective into how the industry is holding up.

The company’s data showed miners “sold” 6,923 BTC in the past week, while they generated only 6,075 BTC during the same period. This means that miners sold 848 BTC more than they received as rewards for mining and transaction fees. 

 Table showing the bitcoins miners generated and spent.  (Source: ByteTree)

According to some prominent members of the crypto community, this could be a sign that inefficient miners are capitulating as they struggle to cover costs. 

Given the fact that Bitcoin’s price has increased during the time, it could mean that we’ll be up for a major bull run once all the inefficient miners are shaken out. 

However, the increasing number of BTC miners sold in the past week might not indicate that they are capitulating en masse. Liquidating entire BTC holdings and shutting down operations isn’t all that widespread, especially when mining Bitcoin. When faced with increasing costs, miners often choose to sell their machines to places where electricity is cheaper to avoid more losses. Adam Back, the CEO of Blockstream, also said that this methodology might be flawed.

In addition to that, many experts and analysts weighed in on the metrics from ByteTree, saying that they provide an incomplete picture of how mining pools work. The company’s data only takes into consideration “first spends” – the first time the bitcoin miners hold leaves their wallets. As mining pools distribute the bitcoin mining rewards they earn to all of the miners in their pool, the first spend from their wallets is usually related to distribution and is not indicative of any major selling pressure from large operations.

To determine whether or not miners actually sell more BTC than they generate, one would need to track second spends of the BTC they received as rewards. Even then, it might not show that they’re struggling with profits, but rather that they’re liquidating their long-term holdings.

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