Bitcoin (BTC) miners have adopted a strategy of consistently accumulating more coins for almost one year, according to market insight provider Glassnode.
Bitcoin miners’ accumulation has been on an uptrend since April 2021, with their cumulative balance sitting slightly below 1,825K BTC.
Source:Glassnode
This trend change among Bitcoin miners started in 2020 after they transformed into buyers and hodlers. This behavioural change might have been triggered by unprecedented factors like Bitcoin mining being unwelcome on Chinese soil.
For instance, more than 90% of China’s crypto mining capacity was lost after authorities disconnected BTC mining sites in Sichuan in June.
Hodling and accumulation have emerged as favoured strategies in the crypto space. Data analytic firm IntoTheBlock recently noted:
“As BTC soars to $42,000, more than 15,000 BTC in outflows from exchanges were spotted on March 21st, the largest since Jan 29th. The last time BTC experienced a large outflow, it was followed by a significant rise in price.”
Source:IntoTheBlock
Cryptocurrencies leaving exchanges signifies a hodling culture because coins are transferred to digital wallets and cold storage for future purposes rather than speculation. Furthermore, it illustrates a bullish sign based on reduced selling pressure.
With Bitcoin’s price being below the 200-day moving average(MA) longer than the big correction witnessed in 2021, it remains to be seen how the leading cryptocurrency plays out in the short term.
Source:TradingView
The notable correction in 2021 was prompted by the massive exit of crypto miners from China based on an intensified crackdown. As a result, Bitcoin nosedived from highs of $64,800 to lows of $30,000 in May 2021.
On the other hand, the 200-day MA depicts a market trend because it shows an average of approximately 40 weeks of trading.
On-chain data shows Bitcoin miner reserve has showed a sharp spike recently, suggesting that miners are currently loading up on the crypto.
Bitcoin Miner Reserve Shoots Up; Trend Of Accumulation From Last Year Continues
As pointed out by an analyst in a CryptoQuant post, the BTC miner reserve has shown strong uptrend recently. This seems to be a continuation of the accumulation trend from the last year.
The “miner reserve” is an indicator that tells us the total amount of Bitcoin currently stored in the wallets of miners.
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When the trend in the metric is towards up, it means miner inventories are growing as they stock up on more of the coin. Such a trend can be bullish for the price of the coin as it shows miners are currently accumulating BTC.
On the other hand, a downtrend in the indicator implies miners have started to dump their Bitcoin. This kind of trend is naturally bearish for the price of the crypto as miners usually sell in big amounts.
Related Reading | Why Sovereign Nation States May Begin Acquiring Bitcoin In 2022
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Now, here is a chart that shows the trend in the BTC miner reserve over the past couple of years:
Looks like the value of the indicator has showed sharp uptrend recently | Source: CryptoQuant
As you can see in the above graph, the miner reserve has been gradually moving up since May. A few days back, when the price of Bitcoin dropped down to $39k, the metric showed a huge spike up as miners bought the dip.
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Miners have traditionally been big sellers in the market as they have had to sell some of what they mine to keep their operations running. However, as BTC’s price has risen, and their machines have gotten more advanced and efficient, miners have started selling lesser as it’s enough to sustain electricity and other mining costs.
Miners, who have originally always brought selling pressure to the market, have been shifting towards becoming hodlers for a coupe of years now. This can be quite bullish for the price of the coin in the long term.
BTC Price
At the time of writing, Bitcoin’s price floats around $42k, down 0.6% in the last seven days. Over the past month, the crypto has lost 10% in value.
The below chart shows the trend in the price of BTC over the last few days.
BTC's price plunges down after breaking above $44k | Source: BTCUSD on TradingView
BTC managed to reach as high as $44.4k in its recent move up, but today the crypto has once again come back down, erasing the gains of the past couple of days.
Featured image from Unsplash.com, charts from TraadingView.com, CryptoQuant.com
On-chain data shows Bitcoin miner reserve is growing as miners are accumulating BTC. The Puell Multiple confirms that miners don’t want to sell at the current price level.
Bitcoin Miner Reserves Grow To Highest Value For The Year
As pointed out by a CryptoQuant post, BTC miner reserve has been going up as miners seem to be waiting before selling.
There are two indicators of relevance here. The first is the “miner reserve,” which is a metric that simply measures the amount of Bitcoin that miners are currently holding in their wallets.
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An uptrend of this indicator implies miners are accumulating their coins rather than selling. On the contrary, a downtrend would suggest miners might be dumping their Bitcoin.
The other indicator is the famous “Puell Multiple,” a metric that tells us how profitable miners would be compared to the last year if they sold all their mined coins today.
The Puell Multiple’s value is calculated by taking the ratio between the daily value of issued coins and the 365-day moving average of it.
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Related Reading | Bitcoin Bottom Signal From Bear Market, Black Thursday Could Save The Bull Run
Now, here is a chart that shows the trend in the value of these BTC indicators over the past few months:
Looks like the value of the miner reserve has been going up recently | Source: CryptoQuant
As you can see in the above graph, the BTC miner reserve seems to be increasing. This value of the indicator is the highest it has been for the year.
Related Reading | Goldman Sachs CEO Sidesteps Bitcoin Inquiries, Says Blockchain Is More Important
Also, the Puell Multiple’s value seems to be around 1.13. Such a low value indicates that miners aren’t finding it that profitable to sell at the current level. This explains the uptrend of the miner reserve as miners are currently holding on to their coins.
So, the Puell Multiple’s current value might mean that Bitcoin is undervalued at the moment. This trend could prove to be bullish for the coin’s price.
BTC Price
At the time of writing, Bitcoin’s price floats around $49.7k, down 12% in the last seven days. Over the past month, the crypto has lost 26% in value.
The below chart shows the trend in the price of BTC over the last five days.
BTC's price seems to have only moved sideways in the last few days | Source: BTCUSD on TradingView
Since the crash around a week ago, Bitcoin has mostly been in consolidation as the price of the coin looks to be stagnating. Currently, it’s unclear when the crypto might break out of this rangebound market or which direction it will escape in.
Featured image from Unsplash.com, charts from TradingView.com, CryptoQuant.com
“Since 2020, miners have been HODLers (and buyers) of BTC. This is a sea change in behavior. Miners have not been in sustained accumulation behavior since the 2009-2014 era.”
This trend change might have been prompted by unprecedented factors like Bitcoin mining being unwelcome on Chinese soil. For instance, more than 90% of China’s crypto mining capacity was lost after authorities disconnected BTC mining sites in Sichuan in June.
This turn of events left Bitcoin miners with no choice but to close shop and move elsewhere. Nevertheless, this has proven to be a blessing in disguise for the United States because it has now taken the lion’s share in Bitcoin mining.
According to market insight provider Arcane Research:
“Since Bitcoin miners have economic incentives to utilize renewable energy, their sustainable power mix is estimated to be 58% – almost three times higher than the world average.”
For instance, El Salvador’s decision to use volcano power to mine BTC was propelling the leading cryptocurrency’s quest to accelerate the development of renewable energy.
Bitcoin is being held for prolonged periods
According to crypto insight provider unfolded:
“BTC is increasingly being held for relatively long periods, and as of October 25th, over 66% of total BTC supply has been held for at least 6 months.”
Therefore, it shows holding continues to be a favored strategy in the Bitcoin market.
Meanwhile, Glassnode believes the high number of entities transacting on the BTC network prompted the realization of a new all-time high (ATH) price of $66,900 on October 20. The crypto analytic firm explained:
“On Oct 20th, 2021, there were 27.6M entities on the Bitcoin network – a number that keeps on growing. That day, the average on-chain entity held 0.68 BTC worth $44.4k. On Sep 23rd, 2009, Bitcoin per entity topped at 1,081.38 BTC for $0.”
Whether Bitcoin will set a new record high price before the year closes remains to be seen.
A yearlong price rally in the Bitcoin (BTC) market and hopes for more upside moves in the future has prompted traders to hold the token instead of trading it for other assets, Glassnode data shows.
The blockchain data analytics service revealed Thursday that the total amount of “hodled or lost coins” reached a nine-month high of over 7.21 million BTC. In simple terms, the Bitcoin metric reflected an increase in out-of-circulation tokens — those that may have been stored in cold wallets by long-term holders or got lost due to human errors, with a minimum chance of recovery.
In simple terms, the Bitcoin metric reflected an increase in out-of-circulation tokens — those that may have been stored in cold wallets by long-term holders or whose private keys are lost forever for various reasons.
BTC amount of HODLed or Lost Coins. Source: Glassnode
As a result, the total number of lost/hodled Bitcoin exceeded 34% of its total supply of 21 million tokens, making the cryptocurrency scarcer.
More evidences of a Bitcoin supply shock
Further data provided by CryptoQuant showed that the amount of Bitcoin reserves held across all the crypto exchanges dropped to its lowest level since August 2018 — at 2.337 million BTC on Oct. 28, 2021.
Meanwhile, the Miners Position Index (MPI), which measures the ratio of BTC leaving all miners’ wallets to its 1-year moving average, has been treading below zero since March 6, 2021, suggesting strong accumulation among miners.
Bitcoin all exchange reserves and miners’ position index. Source: CryptoQuant
“The amount of Bitcoins [owned by miners] is on similar levels that were in May when the price was under $40k,” noted a CryptoQuant analyst as BTC attempted to rebound after falling below $60,000 on Oct. 26, adding:
“You can see easily how early we are still before the final bulls run.”
What BTC price technicals say
Bitcoin’s price correction from around $67,000 to $58,100 appeared after October’s 60% rally. However, BTC/USD formed a parallel descending channel range (purpled), raising possibilities that the structure is a Bull Flag.
BTC/USD daily price chart featuring Bull Flag setup. Source: TradingView
Bulls Flags are bullish continuation patterns that send the price in the direction of their previous trend following a consolidation period to the downside. In doing so, the technical indicator eyes their upside targets at length equal to the size of the previous uptrend, also known as Flagpole, once the price breaks above the Flag’s upper trendline with higher volumes.
Related: Is Bitcoin price mimicking the 2017 bull run? Find out on The Market Report with ETF expert Eric Balchunas
The Bitcoin flagpole is approximately $15,000 long. That means the cryptocurrency could technically rise by as much as $15,000 from the point of the breakout. The Fibonacci levels in the chart above may work as floors to support rebound towards or above $70,000.
However, not all traders are convinced the current setup is bullish in the short term.
“Some would say this is a bull flag, and that’s possible. But the volume characteristics point to a move lower from here most likely imo,” commented pseudonymous crypto trader Alex.
Fellow trader Pentoshi added that a break below the recent lows of $58,000 would be bad news for the bulls. He said:
“BTC off 58k to the dollar What if this is a big bull flag, and that we are in a bull market where bull flags break up? Now in theory price shouldn’t go back to those lows or Bitcoin is in trouble 64k down to 29k 29k back up w/ only 2 misses on the macro during that time.”
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.
The below is from a recent edition of the Deep Dive, Bitcoin Magazine’s premium markets newsletter. To be among the first to receive these insights and other on-chain bitcoin market analysis straight to your inbox,subscribe now.
China’s mining exodus this year has become the biggest opportunity for bitcoin miners to capitalize around the world. Not only have we seen the network hash rate continue its aggressive recovery over the last few months, but we’ve seen mega growth in public bitcoin miner production with major mining opportunities unfolding, especially in the United States. One country’s ban is another country’s hash.
From Luxor’s Hashrate Index Quarter 3 Report, “Collectively in Q3, these miners mined 79% more bitcoin than they did in Q2 and 155% more than they mined in Q1.”
Luxor also expects global hashrate to reach previous all-time high levels in Q4 of 185 exahashes per second (EH/s; 1 exahash is 1 quintillion hash calculations), which would be a 215% increase from July lows. Currently we’re around 143 EH/s.
Source:Luxor
These public bitcoin miners above are just six of the now 24 in the growing market of a $15.82 billion industry market cap. The market cap doesn’t include Core Scientific, valued at $4.3 billion which went public via SPAC this year, or Bitfury, who announced plans to go public today valued at $1 billion.
Even without projecting increases to current valuations or tracking smaller upcoming public mining deals (i.e. Stronghold Digital Mining valued at $100 million to go public this year), the public mining industry is already valued at over $21 billion. The North American public bitcoin mining firms alone are holding over 20,000 bitcoin worth more than $1.1 billion. One major bitcoin price up could double or triple the industry’s market cap in a few months. That’s some incredible growth and upside for an industry that only had its first public miner in 2016.
Opportunity In The United States
Data from Foundry USA, one of the largest mining pools in the world with 9-10% of hash rate, shows the United States has nearly a third of global hash rate with New York, Texas, Kentucky and Georgia amongst the top mining states in their mining pool. Foundry’s latest data, presented by Nic Carter and Castle Island Ventures at the Texas Blockchain Summit, roughly estimates a doubling in U.S. hash rate using the Cambridge Bitcoin Electricity Consumption Index’s data from April 2021. Although these are different data estimates and reference points, they give us a rough idea of the U.S. hash rate picture.
Source:Castle Island Ventures, Foundry USA
Source:Cambridge Bitcoin Electricity Consumption Index
China’s bitcoin mining exodus may go down as the catalyst that propels the United States to become a bitcoin mining powerhouse. Texas Senator Ted Cruz this weekend spoke about how he sees bitcoin “as a way to strengthen our energy infrastructure” and how it has the “ability to unlock stranded renewables”.
This came in the same discussion where he spoke about an enormous opportunity for Bitcoin to address the West Texas flared natural gas issues, which is home to 50% of the country’s flared natural gas. Never have we seen a U.S. politician speak to Bitcoin’s energy innovation as intelligently as this. The arguments for Bitcoin as a demand response innovation and controllable load resource are growing too important to ignore. Many are waking up to the idea that Bitcoin is an energy innovation just as much as it is an economic one.
