NAIROBI (Coinchapter.com) – As the Bitcoin halving set for April 19 draws near, miners are exhibiting a strategic shift. They are decreasing their Bitcoin reserves to a three-year low of 1.8 million Bitcoin, valued at approximately $124 billion. This movement signals a preparation for the anticipated event that historically influences Bitcoin’s value and mining profitability.

Mining Desinty chart. Source: CryptoQuant

MartyParty, a crypto analyst, spotlights the imminent challenge miners face in his post on X. By the end of April, the cost for S19 XPs miners is set to leap from $40,000 to a staggering $80,000. To remain viable, miners must double their selling price, a daunting task amidst Bitcoin’s price volatility.

Bitcoin miners holdings. Source: Glassnode

Glassnode data shows a drop of 8,426 BTC ($530 million) in Bitcoin held by miners from the start of the year, indicating a trend of pre-halving sell-offs. Initiated in late October, this strategic sell-off aimed to leverage Bitcoin’s price surge, partly driven by new spot Bitcoin ETFs.

Bitcoin miners reward. Source: CryptoQuant

Mining companies, in anticipation of the halving, are positioning themselves for changes in reward structures. The upcoming halving will reduce Bitcoin rewards for miners, slicing the current 6.25 coins every 10 minutes to 3.125 coins. This adjustment not only affects the supply of new Bitcoin but also challenges miners to adapt their operations to maintain profitability.

Why Are Miners Selling Bitcoin?

Miners sold off holdings to capitalize on the rising Bitcoin prices driven by the launch of spot Bitcoin ETFs. However, the report argues that the influence of the halving on prices has diminished over time, as the new issuance of Bitcoin is smaller relative to the total available supply. In the last year, the issuance of Bitcoin averaged 28,000 per month, compared to 417,000 BTC sold by long-term holders.

Selling pressure from original Bitcoin (OG) holders may even surpass the rate at which new Bitcoin is created. Analysis shows spending by OG holders, indicated by the pink line, is currently at around 8% annually. This is a significant increase from the historical norm of 1.1%. After the halving, the issuance rate, shown in orange, will drop from 1.8% to about 0.8% annually, further tightening the supply of Bitcoin.

OG Supply. Source: CryptoQuant

Additionally, the prolonged dry season in the southwest of China, which typically extends from October to March/April, could be another factor contributing to the decline in miners’ Bitcoin balances. Miners in China control about 20% of the Bitcoin network’s computing power. During the wet season, when hydropower is plentiful, some regions in China ramp up their mining operations by adding more hardware.

The upcoming Bitcoin halving is set to be a significant test for miners, as it is expected to reduce their revenues and simultaneously increase their production costs. Industry consolidation is a possibility, as well-capitalized players acquire the distressed assets of less efficient rivals.

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Filed under: Bitcoin - @ April 10, 2024 10:47 pm