Author: Ciaran Lyons, CoinTelegraph; Translated by: Tao Zhu, Golden Finance
The amount of bitcoin on hand for sale by cryptocurrency miners has reached its highest level in more than two years, which could cause the price of bitcoin to plummet in the short term if history repeats itself.
There have been several occasions when Bitcoin miners’ OTC balances were high, followed by Bitcoin price declines of up to 63% in just a few months.
According to an August 21 report from CryptoQuant, “Historically, increases in Bitcoin OTC balances have been associated with declines in Bitcoin prices.”
OTC balances could mean heavy selling
After a 70% surge in the past three months, miners' Bitcoin OTC balance has reached its highest level since June 2022. Data shows that it has now reached 368,000 Bitcoins, or about US$22.36 billion.
“The large increase in OTC balances indicates active selling activity by miners,” CryptoQuant added.
High levels of miners’ Bitcoin OTC balances often lead to a sharp drop in Bitcoin prices. Source: CryptoQuant
In May 2018, after OTC Bitcoin balances surged to over 400,000 BTC, the price of Bitcoin was $8,475. By December 2018, the price had plummeted 63% to $3,183.
Similarly, in November 2021, when Bitcoin’s price was around $64,000 and miners’ OTC balances reached an all-time high of nearly 500,000 BTC, the asset’s price fell 45% to $35,058 two months later in January 2022.
CryptoQuant explains that miners choose OTC to sell Bitcoin because they seek “better operations” and want to avoid having a significant impact on Bitcoin’s price as they would if they sold on cryptocurrency exchanges, as the OTC market has higher liquidity.
However, the recent decline in the supply of Bitcoin on cryptocurrency exchanges and the accumulation of 94,700 Bitcoins by Bitcoin whales over the past six weeks may balance the selling pressure and support the price of Bitcoin.
Miners still struggling after Bitcoin halving
Since the Bitcoin halving in April, operating costs have continued to rise and mining rewards have decreased.
Currently, the average bitcoin miner is operating at a loss. The average cost of mining one bitcoin is $72,224, according to MacroMicro and CoinMarketCap, while the current price of bitcoin is $60,797.
“Every miner earned less in Q2 than in Q1, but some miners made up for the reduced revenue better than others by scaling their hashrate during the quarter,” Bitcoin commentator Colin Harper explained in an Aug. 22 X post.
Revenues for major cryptocurrency mining companies declined in the second quarter of 2024 compared to the first quarter. Source: Colin Harper
“Every public miner we update has gone to great lengths to upgrade their rigs to the latest equipment,” Harper added.
On August 18, VanEck said that if Bitcoin miners partially transitioned to providing energy to the artificial intelligence and high-performance computing (HPC) sectors by 2027, they would have the opportunity to generate an additional revenue of approximately $13.9 billion per year.
“AI companies need energy, and Bitcoin miners have energy,” VanEck said.
