Underwater Bitcoin miners increase sales pressure on crypto
by Arthur · July 6, 2022
Bitcoin prices have fallen so low that cryptocurrency miners have become sellers, pushing the already downturned market further. Recent data shows an increase in the amount of bitcoin being moved by miners from the mining pool to crypto exchanges in June, as the price of the cryptocurrency plummeted from $ 30,000 to $ 20,000, according to CryptoQuant. The event, known as “miner capitulation”, suggests that miners were preparing to sell bitcoin – probably to cover mining expenses or to capture larger gains by selling at a price they consider to be overvalued. “Given rising electricity costs, and bitcoin’s sharp drop in prices, the cost of extracting a bitcoin may be higher than the price of some miners,” Citi analyst Joseph Ayoub said in a note Tuesday. “With high-profile reports of layoffs from mining companies, as well as miners who have used their equipment as collateral to borrow money, the bitcoin mining industry may be under increasing pressure.” If bitcoin prices stay below average mining costs, miners who do not sell to finance operations may be forced to suspend or discontinue them, which could ultimately lead to weaker security in the overall Bitcoin network. Ayoub noted, however, that there is still no evidence that miners have laid off. Miner capitulation is also a historical indicator that the market has entered the bottom territory, said CryptoQuants Julio Moreno. Bitcoin fell to a low of $ 17,598.05 in June, according to CoinMetrics. It traded at around $ 20,000 on Wednesday, more than 70% below the record in November. Less mining, weaker security Miners who sell their bitcoin can continue to be a source of sales pressure if bitcoin prices remain so low. However, other miners may be forced to suspend or discontinue operations, which may lead to a decrease in the network hash rate and ultimately weaker network security. Ayoub noted that the hash rate remains stable for now. The hash rate measures how much computing power the Bitcoin network uses to process transactions and is a key indicator of the network’s health. “Reductions in hash rates reduce the security of the Bitcoin network,” Ayoub said. “The lower the hash rate, the less computing power is needed to control the network’s hash power. This can lead to the risk of malicious actors launching a 51% attack, which will result in attackers being able to prevent new transactions, reverse transactions and double use. coins. ” In June, several listed mining companies lowered their hash rate growth targets “out of necessity and to conserve capital,” JPMorgan analyst Kenneth Worthington said in a note on Wednesday. “Bitcoin fell to levels last December 2020, and operators operating older (less efficient) hardware for mining limited operations,” he said. “Our basket of thirteen U.S. listed bitcoin miners had a total market value of ~ $ 3.7 billion as of Thursday, June 30 (down ~ 45% for the month of June).”
