Bitcoin Miner Liquidations threaten Bitcoin’s recovery

The profitability of Bitcoin mining has declined along with the market decline. The cash flow of the mining rigs has become less and less over time, causing bitcoin miners to start selling their assets to cover the cost of their operations. But even as this rages, there is a bigger problem that could threaten the recovery that BTC has made so far, which is the fact that larger miners are being forced to liquidate their holdings.

Bitcoin Miners can not meet

Usually, bitcoin miners are known for keeping the coins they realize from their activities. Since miners are not buying the coins in the first place, it makes them the natural net sellers of bitcoin. However, their tendency to keep these coins has often seen them have to unload their suitcases at suffering markets. So instead of actually selling in a bull, they tend to hold on until the bull market is over and with profitability in a bear market, are forced to sell coins to finance their operations.

Related Reading | Bitcoin Recovery Wades Off Celsius Liquidation, But For How Long?

The same is the scenario that is currently playing out in the market. With bitcoin more than 70% down from its all-time high value, miners are nowhere near as profitable as they were back in November 2021. In the first four months of 2022, it is reported that public mining companies should have loaded approximately. 30% of their BTC gotta come from mining. This meant that the miners had to sell more BTC than they produced in the month of May.

Given that the market was significantly better in May than in June, the miners are expected to pick up sales. This would likely see miners selling all their BTC production for the month in addition to the BTC they already held for 2022.

bitcoin miners

BTC miners selling off holdings | Source: Arcane Research

Consequences of a sell-off

It is important to note that bitcoin miners are some of the largest bitcoin whales in space. This means that their property has the potential to be a significant market mover if they are dumped at the same time. These miners hold as large as 800,000 BTC collectively with public miners accounting for only 46,000 BTC of that number.

What this means is that if bitcoin miners are pushed to the wall where it is triggering a massive sale, the price of the digital asset would have a hard time holding it back. The massive pressure from the sales side that it would make would push the price further down, likely the event that it would see it hit its final bottom.

Bitcoin price chart from TradingView.com

Declining prices forcing miners to selling BTC | Source: BTCUSD on TradingView.com

The behavior of public miners can often help to point out when a mass sale is threatening. These public companies only give about 20% of all bitcoin mining hashrates, but if they are forced to sell, then it is likely that private miners will be forced to sell.

Related Reading | Gold proves to be a safe haven amid Bitcoin crash

Short-term recovery on the part of bitcoin may drive these sales back. However, it will only be a short life expectancy because energy costs are constant and some machines, namely the Antminer S9, have now become cash flow negative. To survive the bear market, miners would simply have no choice but to dump some BTC to withstand the storm.

Featured image from Newsweek, charts from Arcane Research and TradingView.com

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