2 - 4 minute read
Bitcoin (BTC) is currently experiencing selling pressure at the $28,000 price level, and it is suspected that miners may be responsible for this trend, according to a report by crypto-services provider Matrixport. The company believes that bitcoin miners are being forced to liquidate any new inventory produced because profit margins have compressed in recent weeks.
Mining has become increasingly competitive and often unprofitable due to the continuous increase in bitcoin miner difficulty, which is the measure of how easily miners can discover a new block of bitcoin. As per the report, mining difficulty hit an all-time high earlier this week. Markus Thielen, head of research at Matrixport, stated that “At the current input cost and potential output revenue expectations, most of the machines produced before 2022 appear to be unprofitable.”
This means that miners are forced to sell their inventory at the current level instead of holding on until prices increase, as Matrixport foresees. However, the note also added that “there is now significant upside convexity for miners as profitability could increase fourfold if bitcoin prices increase by 10% plus.”
The report suggests that the selling pressure experienced by Bitcoin may be due to miners liquidating their inventory to cover costs, which may be a cause for concern for traders.
According to CoinDesk, Bitcoin has been on a bearish trend since mid-May, and Bank of America has suggested that the cryptocurrency market’s near-term upside is likely capped. The market’s potential upside may be limited due to inflation fears, concerns about regulation, and the impact of Elon Musk’s tweets on the cryptocurrency market.
This news may cause traders to question whether Bitcoin’s current downward trend will continue, or if an increase in prices is imminent. The report suggests that if Bitcoin prices do increase by 10% or more, miners could experience a significant increase in profitability, which could lead to a rise in prices.
The Bottom Line
The current selling pressure experienced by Bitcoin may be due to miners liquidating their inventory to cover costs, which may be a cause for concern for traders. However, the report suggests that if Bitcoin prices do increase by 10% or more, miners could experience a significant increase in profitability, which could lead to a rise in prices. It is important for traders to keep an eye on Bitcoin’s price movements and consider the potential impact of mining difficulty on the cryptocurrency’s value.
