On-chain data shows Bitcoin miners may be spending now, a sign that could provide impedance to a rally.
The Bitcoin Miner Position Index Has Been Rising Recently
As indicated by the analysts in the CryptoQuant post, miners may be putting some selling pressure in the current market. The relevant indicator here is the “Miner Position Index” (MPI), which measures the ratio between miner outflows and the same 365-day moving average.
“Miner outflow” refers to the total amount of Bitcoin that all validators of this chain are transferring out of their wallets at that moment. Usually, miners withdraw coins from their reserves with the main goal of selling them. Thus, a high outflow value may indicate that this group spends a large amount today.
When MPI compares these outflows to an annual average, the metric’s value can tell you how miners are selling today compared to the average over the last 365 days.
When this indicator has a high value, it means that miners are selling at a higher rate than they are now, while a metric that has a low value can suggest that there is less selling pressure from the chain’s validators than the average of last year.
Now, here’s a chart showing the trend in Bitcoin MPI over the past year and a half:
The value of the metric seems to have been quite high in recent days | Source: CryptoQuant
As shown in the chart above, Bitcoin MPI has spiked up recently and has hit a value of about 4, the highest level that has been observed by the indicator since April last year. Such high-value metrics will suggest miners are taking more money than usual, and therefore have the potential to create tremendous selling pressure in the current market.
From the chart, it can be seen that the spike in the metric is usually followed by a drop in the price of the crypto. The most extreme example is back in April 2022, when the price fell sharply shortly after the metric recorded a higher value than it is now.
The last time the indicator observed a high value returned when the crypto exchange FTX collapsed when the price once again saw a rapid downward movement.
Bitcoin has been busy rallying during the last week or so, touching up to $21,000 so far, so this increased withdrawal now suggests that miners want to take advantage of this opportunity to take profit while they still can, and spend their coins.
If this cohort really wants to sell with the transfer, then the crypto rally may find an impedance and stop here, if not immediately reverse its direction.
BTC price
At the time of writing, Bitcoin is trading around $20,800, up 20% over the past week.
The value of the asset seems to be finding it hard to make a significant break above $21,000 | Source: BTCUSD on TradingView
Featured images from Kanchanara on Unsplash.com, charts from TradingView.com, CryptoQuant.com