BTC Miners Increase Selling Activities: Is a New Trend on the Horizon?

01/18/2024 0 Comments

1. Bitcoin Miners Increase Selling Activities: Is a New Trend on the Horizon?

In a recent twist of events, Bitcoin miners have stepped up their selling actions, thereby exerting a potential bearish pressure on Bitcoin’s price. This is indicated by the Miners’ Position Index (MPI), a tool that measures the ratio of Bitcoin miner outflows in USD to their 365-day moving average. The MPI has recently seen a significant increase, a signal that miners are selling more than the average of the past year. Miner outflows denote the amount of Bitcoin leaving miner reserves, typically intended for selling purposes.

Understanding the Miner’s Position Index

A MPI value above 1 typically suggests that Bitcoin miners are selling more than the average of the previous year, a trend that can be interpreted as a bearish signal for Bitcoin. Conversely, a value below 1 may be seen as neutral or bullish. The recent surge in the MPI is the largest since January 2021, during the onset of a bull run.

Despite miner selling being a regular occurrence due to operational costs like electricity bills, the MPI helps to discern whether their selling activities are substantial enough to impact the Bitcoin market. The impact of the current MPI surge on Bitcoin’s price is uncertain, as previous instances have led to different outcomes. For instance, a significant MPI increase in January 2021 did not impede a bull run despite a temporary price top, while an MPI rise during the April 2019 rally was followed by a market top.

The Current Bitcoin Price

As of the latest data, Bitcoin’s price has been stable, hovering around $43,100. However, the cryptocurrency encountered substantial selling pressure after trying to breach the critical resistance at $48K, resulting in a notable rejection and a drop to the $41K level. The cryptocurrency is likely to undergo a brief consolidation before its next significant move.

Selling Pressure and Bitcoin ETFs

Bitcoin has come under pressure since spot exchange-traded funds (ETF) began trading in the U.S. The selling pressure has been concentrated on Binance, OKX, and Upbit. The price of Bitcoin dropped 12% from its high on Thursday, with Binance leading the ‘sell-the-fact’ pullback. The initial performance of the ETFs has been weak relative to Bloomberg analysts’ projection of $4 billion in inflows on the first day alone, which supports the case for a deeper price drop.

2. Searching for the truth on Bitcoin and swimming pools

If you hit YouTube searching for the truth on Bitcoin and whether the cryptocurrency is harmful to the environment, the results paint a confusing picture. In the play queue, you’ll find no shortage of videos on the theme, which sounds like a good thing – until you look at the titles. First up, we have ‘Why BitCoin is so bad for the planet’ followed straight afterward by ‘Myth: Bitcoin is bad for the Environment’. And the list goes on, bit flipping between whether the world’s most famous cryptocurrency is going to save or kill us all.

Flooding the internet most recently were concerns not just about the energy consumption arising from the use of Bitcoin, but how much water is used to cool all of those hot-running miners (the computers used to validate additions to the blockchain). The trigger for the debate was a paper published in Cell Reports Sustainability, ‘Bitcoin’s growing water footprint’, which reported that a single Bitcoin transaction today could cost as much water as a backyard swimming pool.

Naturally, cryptocurrency advocates were quick to debunk those claims, which doesn’t help anyone searching for the truth on Bitcoin and looking for a consensus on whether the cryptocurrency is harmful to the environment. So, how do we get to an answer?

Getting to the answer

At the heart of the issue is the amount of energy used by Bitcoin miners to validate additions to the blockchain. And, as a reminder, computers that are successful in completing this challenge (which involves finding leading zeros on a hash of the digital ledger) are rewarded with, currently, 6.25 Bitcoin.

However, baked into the protocol is a halving schedule that periodically drops that reward by 50%. Back in 2009, successful Bitcoin miners received 50 Bitcoin for their efforts, and three so-called halvings have taken place since then, with a fourth expected in the first half of this year. And this has a bearing on anyone searching for the truth on Bitcoin and whether the cryptocurrency is harmful to the environment.

Exploring BTC trends – is Bitcoin entering its industrial phase?

Despite the disagreement between analysts online, there are still useful energy consumption figures to be found, which help to frame the problem. To find an answer, we need to know – at the very least – how much electricity a typical miner consumes. And one way to do that is to look at the stats for BITMAIN’s popular S19 model, which – depending on whether it’s air or liquid-cooled (no more noisy fans) – consumes between 3 and 5 kW at the wall.

Running just one of these machines (and large-scale Bitcoin farms could have thousands of them) 24 hours a day corresponds to 72 kWh of energy, at the low end of the scale. To put this in perspective, this is already more than double the energy consumption of an average US household. And Bitcoin enthusiasts have calculated that you’d need 14 solar panels (or more, if the weather is less favorable) to power such cryptocurrency mining equipment.

Miners looking to profit from their activities, rather than simply hoard Bitcoin, will have a keen interest in the price of electricity – and the cheaper, the better. Without a supply of cheap electricity, the economics of Bitcoin mining are not favorable – and that’s before the expected halving of rewards. Hence, miners will seek out areas with readily available, low-cost power such as hydroelectric sources.

High fossil fuel prices that push up electricity prices will mean that miners run at a loss. Searching for the truth on Bitcoin and whether the cryptocurrency is harmful to the environment then becomes a question of how long operators can sustain those losses. When clean energy becomes cheaper than fossil fuel-generated power, you can bet that miners will want to tap into that. Plus, profits could be dented in other ways.

Cryptocarbon

Organizations such as the International Monetary Fund are considering a corrective tax to address the issue of what they dub ‘cryptocarbon’. Their concern is based on a scenario where the value of Bitcoin, or other cryptocurrencies based around a proof-of-work consensus mechanism, rises significantly and brings about the use of large amounts of low-energy efficiency mining hardware.

Bitcoin mining has become a search for cheap energy – which includes sources of natural gas that have to be vented into the atmosphere for safety, but can be repurposed to power blockchain validation. According to operators, there are environmental savings that can be engineered by exploiting what’s termed ‘stranded energy’.

Some Bitcoin farms have struck agreements with energy suppliers to shut down when there’s peak demand for electricity and power is required for more critical uses. Conversely, mining hardware can help to balance electricity grids that find themselves flooded with clean energy – for example, on sunny days, in the case of solar arrays, and on gusty ones, where power comes from wind turbines.

Operators of Bitcoin farms are keen to point out that their infrastructure is interruptible and can benefit energy firms as a buyer of last resort. In the middle of the night when there’s little demand, Bitcoin farms can purchase excess power that would otherwise be rejected at a loss to energy companies.

To be clear, cryptocurrencies that pitch millions of mining machines against each other to collect a single prize do waste energy in the name of securing the network. But it may not be the apocalypse that some suggest, as long as cheap clean energy can be found and market forces deter miners from hooking up their operations to generators fed with fossil fuels.

Bitcoin Miner Core Scientific Set for Revival After Bankruptcy Resolution

“The Bankruptcy Court’s approval of the Plan clears the way for Core Scientific to emerge and re-list on Nasdaq by the end of January 2024,” the statement declares.

3. Bitcoin Miner Core Scientific Announces New Share Plan

In a recent statement, investors with a stake in the business will receive shares under Core Scientific’s new share plan. This follows its Chapter 11 bankruptcy plan being resolved. The company declared bankruptcy in December 2022:

“Under the terms of the Plan, shareholders (as of the anticipated record date of January 23, 2024) will receive shares of the Company’s new common stock and warrants, constituting approximately 60% of the Company’s new equity (following exercise of the warrants issued to existing shareholders and including new shares issued as part of the equity rights offering).”

Core Scientific initially went into bankruptcy due to the volatile crypto market. Additionally, a series of major negative events within the industry. Just a month before it filed for bankruptcy, major cryptocurrency exchange FTX filed for bankruptcy. This led to a plunge in crypto tokens across the market.

Core Scientific further notes that it has paid off its debtor-in-financing debt, which is a type of financing available for companies going through a restructuring process.

“Plan approval comes shortly after the Company announced it had fully paid off its DIP financing and successfully completed an oversubscribed $55 million Equity Rights Offering,” the statement notes.

Meanwhile, as per a report from CoinGecko, Core Scientific maintained control of 10 Bitcoin (BTC) in its assets as of November 2023. However, major Bitcoin mining company Marathon Digital recorded 13,726 Bitcoins on its balance sheet as of the same time.

In July 2022, BeInCrypto reported that Core Scientific sold approximately 7,202 Bitcoins at around $23,000 per coin to service outstanding debt. At the time of publication, Bitcoin’s price is $42,914, meaning that the amount sold would be worth $309.07 million.