Bitcoin miners capitulate, leading to further weakness in the price of BTC
(Kitco News) - Bitcoin (BTC) miners have become the latest group to fall under pressure as conditions in the cryptocurrency market worsen, with some at risk of going out of business unless the top crypto can start to climb higher in the near future.
Despite the weakness seen across the crypto market in 2022, the Bitcoin mining difficulty has continued to climb higher as new mining farms and advancements in technology have boosted the network hashrate.
Data from CoinWarz shows that since July 2021, the Bitcoin mining difficulty has been on an almost not stop trek higher, recently hitting a new all-time high of 36.9505 T. As the mining difficulty climbs higher, it becomes harder for miners to successfully mine a Bitcoin block, ultimately reducing the income earned.
Bitcoin mining difficulty. Source: CoinWarz
As a result of the climbing difficulty amid a falling price of BTC, miners have been forced to sell their Bitcoin holdings at the fastest pace since November 2015, according to data from Glassnode.
Bitcoin miner balance. Source: Glassnode
The increased selling from Bitcoin miners has exacerbated the weakness in BTC price as they looked to offload their holdings in rapid fashion before the price declined any further amid the spreading contagion from the FTX collapse.
As noted by Capriole Fund founder Charles Edwards, there has been a 400% increase in selling pressure over the last three weeks as the FTX drama unfolded, and if things don’t improve soon, some miners might go out of business.
It's a Bitcoin miner bloodbath.— Charles Edwards (@caprioleio) November 21, 2022
Most aggressive miner selling in almost 7 years now.
Up 400% in just 3 weeks!
If price doesn't go up soon, we are going to see a lot of Bitcoin miners out of business. pic.twitter.com/4ePh0TIPmZ
A tweet released by Glassnode highlighted just how much the profitability of mining BTC has declined over the years as the network hash rate climbed to new all-time highs amid an institutional push to open mining operations.
#Bitcoin miner Hash Price has plunged to a new all-time low of $58.3k per Exahash per day.— glassnode (@glassnode) November 18, 2022
With $BTC prices now down over 76% from the peak, the mining industry remains under immense pressure.
Live Dashboard: https://t.co/64jyX7mRzj pic.twitter.com/z692xIFU7k
This increase in selling combined with the fallout from FTX has resulted in the Bitcoin price hitting its lowest level since November 2020 as widespread fear has pushed traders out of the market.
One confirmed casualty is the Bitcoin miner Iris Energy, which was forced to unplug its a large portion of its mining hardware in response to a default notice on roughly $107.8 million in loans they were securing.
This even was significant enough for Twitter user Bitsbetrippin to notice a significant decline in the Bitcoin hashrate and delay in confirming a new Bitcoin block.
Who has shut off #bitcoin #btc mining. Last bitcoin block found over 30min ago, this is a 15-25% drop in total bitcoin hashrate across the network. Someone large or several just powered down. pic.twitter.com/8OWLX7cRa0— Bitsbetrippin (@BitsBeTrippin) November 21, 2022
Thankfully, the design of the Bitcoin protocol suggests that there might be some relief on the horizon as it appears as though the hashrate and difficulty may have topped out following back-to-back difficulty negative or neutral adjustments.
These developments could also lead to a behavioral change for some Bitcoin miners who have adopted a mine-and-hodl approach.
As noted in a follow-up tweet from Charles Edwards, “Mine-and-hodl is not a viable strategy as a Bitcoin miner. Miners are paying the consequences of the "never selling" arrogance widespread just 6 months ago. You need to manage (trade) your Bitcoin position constantly in this market.”
Indeed, the Hodl strategy that crypto is known for has come back to haunt many investors as data from IntotheBlock shows that “For the first time since March 2020, over 50% of Bitcoin holders are losing money on their position.
While the events of the past year have come as a shock to many, experienced crypto investors are all too familiar with the non-stop barrage of negative developments that come in a crypto winter. At this point, all you can do is buckle down and ride out the storm in hopes that someday soon, the winter will give way to spring.