Bitcoin miners appear to be gearing up for a significant sell-off, prompted by a sharp decline in Bitcoin miner reserves and a drastic increase in Bitcoin inflow from miners on January 17, 2024.
This shift is attributed to the extreme weather conditions currently affecting Texas, the current epicenter of Bitcoin mining operations following the 2021 ban in China. Bitcoin miners are ready to sell 10,000 BTC.
Are Bitcoin Miners Preparing to Sell?
According to CryptoQuant data, there is a notable decline in Bitcoin Miner Reserves. Miner Reserve data indicates the amount of Bitcoin held in miners’ wallets, typically resulting from the mining process and not yet transferred to other wallets or exchanges, suggesting they are still holding for potential profit or operational usage.
When Miner Reserve decreases, it typically signifies that Bitcoin miners are starting to transfer their mined Bitcoin to other wallets or exchanges, where they are likely to be sold.
Conversely, when Bitcoin Miner Reserve increases, it generally indicates that Bitcoin miners have acquired Bitcoin, suggesting a potential increase in Bitcoin prices as the network becomes more active.
On both January 13 and January 17, 2024, Miner Reserve figures experienced a significant drop, indicating that the majority of miners are currently preparing to sell.
The most notable decrease occurred on January 17, with reserves dropping by around 10,000 BTC in a single day, signaling a potential significant selling pressure.
This potential selling preparation is further supported by data on Bitcoin Inflow from Miners, which has been on the rise in recent days, especially on January 12 and January 17, 2024.
Current data on Bitcoin Inflow from Miners indicates that Bitcoin miners are currently sending their holdings to exchanges. When Bitcoin is moved to exchanges, miners are typically preparing to sell, creating the potential for a significant correction in Bitcoin prices.
Surprisingly, this sudden decline is attributed to the United States, specifically Texas, which has become the new hub for Bitcoin miners following the widespread ban on Bitcoin mining operations in China in 2021.
Extreme Weather as the Root Cause
The potential selling movement from miners comes after a warning from ERCOT (Electric Reliability Council of Texas), a government-owned company that provides electricity to the Texas region.
ERCOT issued a warning to Texas residents on January 12, 2024, about an impending extreme cold weather condition that would impact electricity demand. In extreme cold conditions, electricity consumption tends to rise, leading ERCOT to caution that Texas’s electricity supply could potentially fall short of the demand.
On January 14, 2024, ERCOT issued a further warning, stating that electricity reserves were dwindling rapidly and urging residents to reduce non-essential electricity usage. ERCOT also warned that these extreme conditions would persist from January 14 to January 17, 2024, with the potential to extend into January, considering historical weather data indicating January as the coldest month for Texas.
This situation seemingly prompted Bitcoin miners to scale back their operational activities due to the advisories to reduce non-essential activities.
As a result, the current Bitcoin hashrate is declining, indicating a reduction in the number of miners on the network. The decline in hashrate can slow down transaction speed and compromise the security of the Bitcoin network, typically leading to a decrease in Bitcoin prices.
Coupled with the lack of energy reserves in extreme conditions, there is a possibility of increased electricity prices for tertiary needs like Bitcoin mining in Texas.
Considering these factors, some Bitcoin miners seem to have decided to prepare for selling, minimizing the risk of losses and capitalizing on the momentum before a correction occurs.
In summary, the overall decline in reserves is attributed to the extreme weather conditions in Texas, the primary location for Bitcoin miners.
For investors and traders, this situation could impact Bitcoin prices, especially with the fading positive sentiment from the current Bitcoin Spot ETF.
Therefore, it is advisable for investors and traders not to succumb to FOMO (fear of missing out) and remain vigilant regarding market conditions from all perspectives while maintaining effective risk management.