Bitcoin Miner Reserve Plunges, Bearish Sign for Price?
On-chain data shows that the Bitcoin mining reserve has seen a decline recently, a sign that could be bearish for the price of the cryptocurrency.
Bitcoin Miner Reserve has decreased in recent days
As pointed out by an analyst in a CryptoQuant post, the BTC mining reserve has now hit new yearly lows. The “miner reserve” is an indicator that measures the total amount of Bitcoin currently sitting in the wallets of all miners.
When the value of this metric rises, it means that miners are adding more coins to their wallets right now. Such a trend suggests that this cohort is interested in accumulating BTC at the moment. Miners are an important part of the market and their HODLing of the coin can be a positive sign for the price.
On the other hand, the indicator’s value going down suggests that this cohort is withdrawing their coins from their wallets at the moment. Usually, the main reason why miners transfer the asset from their reserves is for selling purposes. Thus, the price of the cryptocurrency may feel a bearish impact when the calculation shows this trend.
Now, here’s a chart showing the Bitcoin mining reserve trend over the past year or so:
The value of the metric seems to have been trending down in recent weeks | Source: CryptoQuant
As shown in the graph above, the Bitcoin mining reserve has been moving on a downward trajectory since the last rally in the asset’s price began. This means that these chain validators have seen the price increase as a profitable exit opportunity.
Normally, the reason why miners sell their coins is due to the fact that they always have to pay ongoing operating expenses like electricity bills. However, particularly large sales may be a sign that they are struggling more than usual right now.
After the initial dip in the indicator (which was when the rally had just increased), the metric had become stale for a while. Recently, however, the mining reserve has seen another decline.
This new downtrend in the indicator has actually coincided with the BTC price also showing a decline, suggesting that it may have sold from the miners behind the price dive.
After the last leg down in the Bitcoin mining reserve, the indicator’s value has now reached a new yearly low. Since the decline hasn’t actually abated in recent days, it’s possible that this group still hasn’t finished selling.
“This selling behavior could end up in a medium-term bearish sentiment in the market,” notes the quant. “As a result, it is better to manage risk in the coming weeks.”
BTC price
At the time of writing, Bitcoin is trading around $21,600, down 7% in the last week.
Looks like the value of the asset has gone stale in the last few days | Source: BTCUSD on TradingView
Featured image from Jievani Weerasinghe at Unsplash.com, Charts from TradingView.com, CryptoQuant.com
