The plunge in Bitcoin’s price, combined with a substantial increase in mining difficulty, has Bitcoin miners sweating as they fight to keep their heads above water—with the network’s guardians shifting huge amounts of coins.
Figures from blockchain data firm CryptoQuant shows that earlier this month, BTC outflows from miners peaked at 19,000 Bitcoins per day—the highest amount since March.
One reason for the rush in sales is that it is harder to mint coins profitably following April’s halving event. And with mining difficulty also up, mining operations need to work even harder.
But with Bitcoin’s price dropping below $50,000—as it did on Aug. 5—miners are having to sell more coins to cover rising costs. CryptoQuant told Decrypt that miners’ average operating profit was squeezed to 25%, a low not seen since January.
“Indeed, we may have seen a miner capitulation event last week as miner outflows spiked after prices momentarily touched $49,000,” the firm said. “We could still see further miner selling as [they] remain underpaid amid low prices and high mining difficulty.”
Bitcoin exchange traded (ETFs) funds have led to an influx of cash into the space, but the price of the biggest digital asset has struggled the past few months since it hit a record high in March of nearly $74,000.
The virtual coin is now trading for $60,660, according to CoinGecko. The reason is that mining difficulty has shot to new highs: it’s now more difficult than ever before to mint new coins.
Bitcoin mining is the process of processing transactions and minting new coins for the cryptocurrency’s network. The activity is a big business, and miners are typically large-scale operations, utilizing huge warehouses full of noisy computers.
Miners are rewarded with Bitcoin for their work, but April’s halving event—which occurs every four years—slashed rewards in half. Mining has also become more difficult so operations need to work harder and use more energy to keep the network running. With prices low, it becomes harder to cover costs by selling the newly minted Bitcoin.
But it’s not all doom and gloom: the crunch could be coming to an end.
“Miner capitulation can be seen near local bottoms for BTC prices during bull markets,” CryptoQuant said.
Edited by Ryan Ozawa.