Bitcoin on-chain data shows miners offloading BTC as revenue dips

Bitcoin’s on-chain data provides evidence that Bitcoin miners are offloading their holdings. Factors influencing the selling pressure could be reduced profits due to a cooldown of Ordinals activity as well as mining difficulty and hash rate reaching an all-time high.

According to on-chain analytics firm Glassnode, “miners sent a significant amount of coins to exchanges.”

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Data from Glassnode shows Bitcoin (BTC) miner inflows into exchanges hit a three-year high on June 3, at levels last seen during the early 2021 bull market.

Data from Coin Metrics also shows a drop in the miners’ one-hop supply metric, which measures the amount of Bitcoin stored in addresses that receive coins from mining pools.

The metric has recorded a steady upward trend in miner holdings since May 2023; however, miners reversed their accumulation trend in the second week of June.

One-hop supply of Bitcoin miners. Source: Parts Metrics

Increased mining difficulty and reduced ordinal activity

Bitcoin mining difficulty, which refers to the difficulty of finding a new block in the Bitcoin blockchain network, hit an all-time high in early June.

Bitcoin difficulty adjusts periodically to ensure that new blocks are added to the blockchain approximately every 10 minutes on average. When the network’s computational capacity increases, it readjusts to make mining more difficult and vice versa.

The difficulty is adjusted every 2,016 blocks, or roughly every two weeks, and is based on the total computing power, or hash rate, of the network. The last adjustment was on May 31, with a 3.39% increase in overall difficulty.

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Bitcoin mining difficulty. Source:

Increasing Bitcoin difficulty reduces miners’ earnings, eats away at their profitability, and eventually increases their losses.

Additionally, competition among miners has intensified since the last difficulty adjustment, with the network’s hash rate hitting a new all-time high of 381 exahashes per second on June 11. The next difficulty adjustment scheduled for this week will likely add to the selling pressure. .

Bitcoin Ordinals activity, which was responsible for an increase in miner earnings, declined in May, leading to lower miner earnings. The total fees paid for ordinal registrations on Bitcoin abandoned to a two-month low, with trading volumes in non-fungible token markets showing a similar trend.

According to data from Glassnode, seven-day average miner earnings fell from a high of $33.9 million in May to $25.8 million in early June.

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The 7-day moving average of Bitcoin miner revenue (orange) and BTC price (black). Source: Glassnode

June also marked the start of summer, with warm temperatures in the northern hemisphere placing a heavy burden on some mining operations due to the rising cost of electricity.

In 2022, summer heat waves caused miners in Texas to temporarily shut down operations. Texas would represent about 15% of the mining capacity of the United States.

Heat waves could worsen in 2023, leading to a drop in the network’s mining hash rate.

Related: Bitcoin miners have earned $50 billion from BTC block rewards and fees since 2010

Identify miner stress levels

Currently, the cost of producing Bitcoin for existing mining hardware is between $35,532 and $21,244. With Bitcoin price holding above $25,000, the downtrend in Bitcoin mining hash rate may be limited.

However, if the situation worsens over the summer and the cost of mining increases without a commensurate increase in the price of BTC, the industry could slip back into capitulation mode, marked by an acceleration in BTC sales and a reduction in the price of BTC. network hash rate.

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Bitcoin price chart with production cost indicator. Source: Trading View

Additionally, while Bitcoin’s hash rate has continued to rise, Bitcoin’s hash price metric – the market value assigned per unit of hash power – fell significantly in May, suggesting a slowdown in demand for Bitcoin. mining equipment.

According to a Hashrate Index update, the “hashprice (PH) is back below $70.00/PH/day for the first time since mid-March” after hitting an average of $82.23 per PH per day in May, a decrease of 14.8%.

It remains to be seen how far the selloff will extend and whether or not Bitcoin Ordinals activity returns in the meantime.