As Bitcoin miners continue to sell their tokens, the price surge has been halted.
Bitcoin emerged as the leading cryptocurrency in the financial and economic markets despite the market having a large number of digital assets. However, BTC is primarily renowned for its turbulence. Investors had hope after a brief surge a few weeks prior, but the cryptocurrency also experienced a sharp decline that is upsetting Bitcoin miners and may eventually cause them to sell some of their holdings and realize a profit. Reports state that in August 2022, Bitcoin miners sold off 5,925 BTC tokens over the course of two weeks. To make matters worse, Bitcoin miners have a very long history of selling off their assets. At the time of writing this article, Bitcoin is trading in the US$21k range, indicating that its value has failed to retain the critical resistance of US$23,000. Experts say that Bitcoin is standing on its last legs and if it fails to achieve its US$30,000 by the end of September, the year 2023 is going to be equally devastating for the cryptocurrency.
Reports reveal around 14,000 BTC tokens, worth approximately US$300 million at its current price transferred out of wallets within 24 hours. This triggered the highest amount of BTC tokens being offloaded since Jan 2021. This concept is known as miner capitulation and typically indicates that miners have been preparing to sell their previously mined coins to cover their current mining expenses. Bitcoin’s degrading market value is the result of several grim economic and financial factors. With inflation on the edge and the geopolitical crisis in Russia and Ukraine, the crypto market continues to suffer. Meanwhile, lower Bitcoin prices and higher energy costs are contracting the profit margins for miners, which is why they are selling off major portions of their investments to try to contain exposure to the continued volatility in the sector.
Experts believe BTC might decline to US$13k in the coming months
Since July 2022, Bitcoin miners have come under pressure from rising energy costs and falling token prices. The wider crypto market has come under massive strain following months of declines in its biggest coins, shrinking its previous market cap of US$3 trillion to US$1 trillion. This significantly affects Bitcoin miners since the overall margins across the industry have declined to 50% from the 80% peaks. But there are also many BTC miners who are optimistic about the future prospects of mining cryptocurrencies. Miners claim that it would be a blessing if BTC regains back its lost market value, but since its value has reduced, large-scale miners are facing less competition from hobbyists and small operations.
The energy pricing crisis following the Ukraine war is hitting these miners hard following an already tight year. Since the second quarter of 2021 which witnessed a dramatic rise in the value of all cryptocurrencies, there has been a meteoric rise in the number of Bitcoin miners, making the mining process incredibly challenging and competitive. Despite its declining value, miners kept mining tokens and eventually, it led to intense mining difficulty around April and May, this year. Its hash rate rose between June and August, which says that the space will continue to remain competitive.
When will Bitcoin get out of this mess?
Answering this question would be incredibly difficult because Bitcoin’s current movements are quite volatile. Mining difficulties over the BTC network have subsequently decreased, but as miners leave the network, it is projecting the crypto in a bad light. Miners leaving might also trigger negative sentiments in the investment community, which will eventually stop a price rally. We can only wait for market conditions to improve and trigger a sustainable price rally for all cryptocurrencies, but for now, Bitcoin is nowhere near getting out of this mess.