Miner Sell Pressure
As the largest migration in Bitcoin hash-power in history takes place, the market has been speculating as to the magnitude of miner sell pressure that may be creating headwinds for prices. There are two primary factors that may be driving an increase in miner sell pressure:
- Dramatic decline in revenue to the recent ~50% mark-down in prices leading to more coin sold to cover the same fiat denominated costs.
- Logistical expenses and risk incurred by miners to relocate or liquidate mining equipment necessitating liquidation of BTC held in their treasuries. These expenses are likely to be ongoing for some months.
To start our analysis, we can assess the change in aggregate miner revenue (7DMA). This demonstrates that the mining market has experienced an approximately 65.5% decline in revenues since levels sustained in March and April. The 7-day average mining revenue currently sits at around $20.73M/day, which in context, is still 154% higher than it was at the time of the back-to-back halvings in 2020.
Mining Revenue Live Chart
Over this same period, mining difficulty has only increased by only 23.6%. The mismatch between revenue and difficulty is primarily a result of the global shortage in semi-conductors that has limited the ability of miners to expand their operations. In practice, this mean that mining Bitcoin has been exceptionally profitable throughout 2021, and that some mining hardware that would otherwise be obsolete, remains profitable. This means fewer coins need to be sold to cover costs and miner treasury reserves can be built up.
The Bitcoin mining puzzle is 23.6% harder despite revenues being up 154% on a 7-day average basis. Since a very large proportion of hash-power is currently offline and in transit, and the next difficulty adjustment is estimated to be -25%. As such, miners who remain operational are likely to become even more profitable over the coming weeks, unless price corrects further or migrating hash-power comes back online.
https://insights.glassnode.com/the-week-on-chain-week-26-2021/
