On-chain data shows the outflow of Bitcoin miners has increased, suggesting that selling from this cohort may be behind the crypto’s decline to $20,700.
Bitcoin Miner Outflows Register Multiple Spikes Recently
As indicated by analysts in the CryptoQuant post, on Wednesday, miners deposited 669 BTC to the exchange. The relevant indicator here is “miner reserve,” which measures the total number of Bitcoins currently held by miners in their wallets.
“Miner outflow” is a metric that tells you the total number of coins that this blockchain validator is transferring out of the current miner’s reserve. Of course, the value of the reserve decreases when the outflow records a spike, because the same or higher amount of crypto does not flow at the same time.
Generally, miners take BTC from their reserves for the purpose of selling. Thus, every time the outflow registers a high value (or alternatively, the reserve observes a steep decline), it means that this cohort can participate in a large amount of selling at the moment.
Now, below is a graph showing the trend of Bitcoin miner outflow and miner reserve over the past few months:
The value of the reserve seems to have observed significant decline in recent days | Source: CryptoQuant
As shown in the chart above, the outflow of Bitcoin miners has seen two huge spikes in the last few days. The spike on January 14 was about 4,089 BTC, while the one on January 17 was about 2,500 BTC.
At the same time as these outflows, their reserves are also collapsing, meaning that not much volume is coming in to offset these outflows. On Wednesday, there was also a third surge, but it was smaller than the other two.
However, there is still something about this outflow that needs to be considered. About 669 BTC of this outflow went to the centralized exchange. This can be seen in the data for the “miner to exchange flow” metric, which is also shown in the chart.
Typically, exchanges are what investors use to exchange Bitcoins quickly in favor of altcoins or stablecoins, or simply fall back to fiat. While miner outflows can only be a sign that there is some selling (since these holders can only use over-the-counter (OTC) transactions instead of exchanges), direct deposits to exchanges provide more evidence that selling may be on the way . behind the outflows.
While part of the third outflow goes to the exchange, the first two, the larger surge seems to be disproportionate to the significant deposits to the platform.
However, the fact remains that after the first two outflows, the Bitcoin rally slowed to a crawl, and after the third (which went to the exchange), BTC immediately declined and reached $20,700. This could indicate that selling by miners may play a role in the development of the asset’s price.
BTC price
At the time of writing, Bitcoin is trading around $20,700, up 14% over the past week.
Looks like BTC has plunged in the past day | Source: BTCUSD on TradingView
Featured images from Jievani Weerasinghe on Unsplash.com, charts from TradingView.com, CryptoQuant.com