- Analysts reveal differing views on miners’ current profitability crisis.
- One camp sees the crisis as a ‘market top’, while others see it as a ‘buy signal’
After last week’s Fed decision Bitcoin [BTC] appears to be related to another troubling factor affecting its price: mining companies.
The largest digital asset fell below $70,000 after the Fed failed to cut rates in June, contrary to what the market initially expected.
Fast forward to the new week. At the time of writing, BTC was struggling to stay above $65,000 due to what market analysts said could be headwinds from Bitcoin miners.
According to James Van Stratena renowned on-chain analyst, BTC miners have sold more than 30,000 BTC from their reserves since last October.
“Miner addresses collectively hold a sizable coffers of 700,000 BTC, but their balances have fallen by 30,000 BTC since October. This period marks the longest distribution phase for miners since 2017, adding to the headwinds.
Source: Glassnode
Put another way, miners, especially the ineffective ones after the April halving, are selling their holdings to cover costs and possibly exit the industry due to profitability concerns.
Should you sell or buy BTC?
The miners’ profitability crisis, known as miners’ capitulation, has been going on for the past 33 days. So selling pressure from miners could be one of the factors currently weighing on the BTC price.
Some miners have done so diversified in AI computing to remain profitable after the April halving.
However, Quinn Thompson, CIO of crypto hedge fund Lekker Capital, viewed the ongoing miner crisis as a “top indicator for crypto‘ and worse than the miner crisis in the crypto winter of 2022.
“What better top indicator for crypto than all BTC miners bidding indiscriminately on the heels of AI and $NVDA?”
Another user and analyst, Willie Woostated that the BTC price would be “punished” until the hashrate improves.
“The Bitcoin price will continue to be punished until the hash market picks up some volume. This is why bankers called it drug money.”
Source: Willy Woo
Hashrate, the computing power to mine a BTC, dropped significantly after the halving in April and later in May, according to Blockchain facts.
Like Woo, another analyst, Cole Garnerstated that a BTC buy signal was imminent if the hashrate recovered.
“When the hashrate returns, Hash Ribbons will print one of the most historically reliable #bitcoin buy signals ever seen. And we are close to that signal.”
Hash Ribbons are moving averages that follow downward hashrate trends and typically signal buying signals.
That said, while Thompson viewed the miners’ crisis as a “market top indicator,” others cited it as a potential buy signal.
Furthermore, BTC’s value has generally remained close to its own value average mining costswhich amounted to $86,000, and might induce the king’s coin to hit the target quickly enough.