Are the Outflows from Bitcoin Miner Reserves Sufficient for Sell Pressure?

Are the Outflows from Bitcoin Miner Reserves Sufficient for Sell Pressure?

August 15, 2022 0 By Jeanine Sanchez

Part of the way of guaranteeing success as a trader in the Bitcoin market is the ability to spot possible trends. Or better still, identify them as soon as they begin. Such skill can be handy in the face of the current bullishness that Bitcoin and the entire crypto market have entered into.

The Benefits of the Reserve

In the case of Bitcoin, having an eye on the reserve kept by miners can be an advantage with regard to expecting selling pressure. It is the regular practice for miners to save the earnings in reserves against a price increment. The miners can cash out as soon as the asset gains a higher price and can give a significant profit margin.

Many dynamics are involved in the process of mining Bitcoin. The cost of energy and the cost of mining equipment might flip on miners at any moment, especially in the face of inflation and rising energy costs.

Sporadic and unfavorable escalations in those associated mining cost all reduce miners’ profit margin. This development makes miners sell off a larger percentage of their reserve in order to make up for their mining costs.

High costs usually cause selling pressure, and it depends on the volume of Bitcoin that was dropped from the miners’ reserves. The revenue accrued to miners, according to Glassnode in its measurement metrics, has dropped significantly in the past week.

Glassnode’s report stated that the miners’ revenue hit a peak of 1,019.80 BTC as of the 6th of August. But it fell to a depth of 880.31 BTC as of the 13th of August. The metric for Bitcoin miners on CryptoQuant showed that the system had seen a lot of outflows in the last couple of days.

More Outflow to Come?

Coincidentally, the outflows began on the 6th of August, which was the same day that miners’ revenue began to fall. About 3,954 BTC were moved out of the miners’ reserve between the 6th and 13th of August.

Notably, Bitcoin was trading above $22,800 at the time miners’ reserves began to flow out. The asset’s price has since increased. If the sold BTC were sold according to the stated value, it would then be worth well over $90 million.

That is close to 0.019% of the current market capitalization of Bitcoin. The amount of the offloaded Bitcoin is so minute in comparison to the amount of those held in exchanges. It, therefore, might not be impactful on the overall price of Bitcoin.

But if the outflow is prolonged, it might lead to a sliding effect and more sell-offs. Bitcoin will have more selling pressure if that happens.