Bitcoin Miners’ Reserves Reach Two-Year High, Price Drop Expected
Date: 2024-08-23 Author: Henry Casey Categories: CRYPTO PAYMENTS
According to a recent report from CryptoQuant, historical data shows that when miners’ reserves reach significant levels, it often precedes a downturn in the cryptocurrency market.
The report notes that miners’ reserves on over-the-counter (OTC) platforms have increased significantly, reaching levels not seen since June 2022.
Specifically, this growth has pushed miners’ reserves to 368,000 bitcoins, which is valued at approximately $22.36 billion.
“Historically, increases in bitcoin balances on OTC platforms are associated with declines in the price of bitcoin,” the CryptoQuant report notes.
The 70% increase in miner balances on OTC platforms over the past three months suggests that miners may be preparing to sell large amounts of Bitcoin, which could put downward pressure on the market.
The report cites examples from the past where high miner reserves were accompanied by a sharp decline in prices.
For example, in May 2018, when miner balances on OTC platforms exceeded 400,000 BTC, the price of Bitcoin was around $8,475.
By December of that year, the price had fallen 63% to $3,183. A similar situation occurred in November 2021, when Bitcoin was trading at around $64,000, and miner reserves were close to a record 500,000 BTC.
Two months later, the price had fallen 45% to $35,058.
Miners often use OTC platforms to sell their bitcoins, as these venues offer higher liquidity and “better execution” compared to traditional exchanges.
By avoiding selling on exchanges, miners can reduce their impact on the market price of bitcoin.
However, the current high reserves indicate that significant selling activity may be in the offing.
Despite these concerns, there are factors that could offset potential price pressure.
The recent reduction in the supply of bitcoin on exchanges and the accumulation of 94,700 BTC by large holders, known as “whales,” over the past six weeks could support the price of bitcoin.
These developments come amid rising operating costs for miners and decreasing rewards following the bitcoin halving in April.
The average cost to mine one bitcoin is currently $72,224, while the cryptocurrency’s price is hovering around $60,797, according to MacroMicro and CoinMarketCap.
This difference has left many miners operating at a loss.
Cryptocurrency commentator Colin Harper highlighted the challenges faced by miners in a recent post, noting that “every miner made less in Q2 than they did in Q1.”
However, he also noted that some miners were able to offset the decline in revenue by increasing their hashrate and upgrading their hardware.
