Miners Capitulate: What This Means for Bitcoin (BTC)
After months of holding, miners are selling large parts of their coins. The selling accelerated toward the end of June, with some big pools shedding thousands of Bitcoin (BTC).
Miners started selling despite BTC recovering above $21,000. The current BTC price is seen as a temporary relief, possibly leading to further price drops. The overall uncertainty of the market made miners rethink their hoarding, which had reached historical highs during the last bull cycle.
Now, the potential for BTC to erase value at least until the end of the year is making miners reconsider their strategy. Until recently, miners were hoarding most of the 900 BTC produced each day. But even individual mining farms are already shedding their coins on the market. BTC mining was considered an almost foolproof way to turn a profit, but the bear market may lead to another outflow of miners.
Recently mined BTC have commanded a premium previously, for lacking a bad trading or transaction history. Now, miners may be trying to cover their costs and there are also signs of mining rigs sold for a lower price.
Additionally, an Antminer S19, the most commonly used mining rig, is barely profitable on a yearly base. With higher electricity prices, the potential income dwindled from thousands of dollars per year down to about $136. With the added cost of nearly $5,000 per rig, new miners may also think twice before joining the competition.
The Bitcoin hashrate also maxed out at around 230 EH/s, later falling toward 207 EH/s. Miners held a significant portion of their coins at one point, when BTC traded above $60K while costs were still relatively low.
Bitcoin Rainbow Chart Sparks Meme Buying
There is no way to tell if the current price range was a local minimum for BTC. However, the Rainbow Chart model suggests the current price is “basically a fire sale”, and there is a growth of wallets holding above 1 BTC.
At the current price range, some risky buyers may return with a potential long-term outlook, the least of which could be a revisit of previous price ranges. BTC is also expected to dip under $20K again, especially ahead of June’s futures expiration.
The Rainbow Chart also cannot predict how long BTC would spend near the lows before another hike into bubble or overpriced territory. BTC is still in a period between two halvings of the block reward and it is possible the price will not rally any time soon.
DeFi Projects Avoid Liquidations
DeFi projects managed to push back the potential for liquidations. Celsius, which still holds crypto loan positions on Maker Protocol, has added collateral to achieve a lower liquidation price. After the latest collateral deposits, BTC would have to drop below $14K to affect the positions of Celsius.
Solend, a lending protocol on Solana, also retains one of its biggest loans instead of forcing an OTC liquidation. SOL is now above the liquidation price, though the risk remains with another market downturn.
For now, MicroStrategy announced that it holds its BTC outright and does not face a liquidation call. However, other DeFi protocols may suffer as whales deposit funds and take out stablecoins.
Liquidations are also threatening ETH balances on DeFi hubs, which may be triggered if ETH falls under $900.
The market also operates with a diminished supply of stablecoins, leaving just 67.2B USDT. Liquidations may continue, especially if caused deliberately to attack known collateralized positions.
FTX Exchange Refinances BlockFi
FTX exchange, one of the biggest hubs for derivatives trading, will now support BlockFi to prevent further fallout. BlockFi, which is also an asset custodian, is attempting to calm markets that it has adequate liquidity and solvency and no exposure to Celsius or 3AC.
Celsius (CEL) continues to trade, and has not crashed to zero after the reassuring collateral increase. In the past week alone, CEL rose by 117% to $1.21.
But time will show if the support from whales and the credit lines available are sufficient to stop future crashes. The Crypto Fear and Greed index remains at nine points or extreme fear, though some traders are taking risky long leveraged positions.
TRON DAO is also growing its support for its native stablecoin. USDD has de-pegged a bit and is down to $0.97, while TRX is at $0.06. There are now more than 707M USDD minted, still a small part of the stablecoin market.
The big fear around TRON is that it would lead to the creation of another over-inflated DeFi hub, even with higher collaterals. On a bigger scale, crypto markets may also slide further after the even bigger de-leveraging of stock markets and other asset markets.
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