Bitcoin price crashes as outflows reach multi-month highs.

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Written by

Kevin Lopez
Published on

November 10, 2022

Key points: 

  • Miners started operating at a cost higher than the block subsidy and transaction fees they earned.
  • The result is that they are shutting down and selling bitcoins to cover costs.
  • Outflows from miner wallets exceeded 5,400 BTC.
  • In the future, the situation could get worse if large mining companies sell large amounts of stored BTC to pay off their debts.
  • Historically, there has been a correlation between miner exits and BTC price bottoms.

Bitcoin miners could be the next "trigger" for BTC prices as withdrawals surge, study warns.

In a Nov. 10 Quicktake post by on-chain analytics platform CryptoQuant, contributor MAC.D hinted that miners could soon face “bankruptcy.”

Study: Network conditions 'killing' miners

After BTC/USD dropped 20% in a few days, miners started operating at a cost higher than the block subsidy and transaction fees they earned.

The result is that miners are shutting down and selling bitcoins to cover costs.

“BTC security is at an all-time high, but mining volume is gradually declining. This will kill miners,” explained MAC.D.

He noted that on November 9 alone, outflows from miner wallets exceeded 5,400 BTC, which “could be explained by increased selling pressure.”

In the future, the situation could get worse if large mining companies sell large amounts of stored BTC to pay off their debts.

“There has been a lot of news that Nasdaq-listed miners cannot pay their debts. If they go bankrupt, there will be a situation where they have no choice but to sell BTC,” the post continued:

“Therefore, it is necessary to keep a close eye on the miner withdrawal table, and if the amount of miner withdrawal increases, BTC is likely to fall further.”

A bright spot may emerge soon after such a major capitulation, though. Historically, there has been a correlation between miner exits and BTC price bottoms.

“But previous miner bankruptcies constituted a bottom for BTC,” the post concluded:

“So when they go bankrupt, they have to use it as an opportunity to buy BTC.”

Bitcoin miner outflows chart. Source: CryptoQuant

Bitcoin miner outflows chart. Source: CryptoQuant

Mining costs outweigh the benefits

Continuing the thread, journalist Colin Wu pointed out that even the most popular Bitcoin miners are now unprofitable.

“With BTC down 20% in the past 7 days, F2POOL shows that Bitcoin miners like Whatsminer M30S and Antminer S17Pro have fallen below the shutdown price,” he tweeted that day, linking to major mining pool f2pool:

“Top bitcoin mining machines such as Ant S19 XP also account for 56% of electricity bills.”

Charles Edwards, CEO of asset management firm Capriole, also noted that production costs are unsustainable compared to what miners are earning at current prices.

"Many bitcoin miners are now shutting down their rigs," he commented on a chart.

Bitcoin mining production cost annotated chart. Source: Charles Edwards/ Twitter

Bitcoin mining production cost annotated chart. Source: Charles Edwards/ Twitter
“Bitcoin’s electrical cost has just been breached for the 2nd time only in 5 years. The electrical bill for the average miner is now greater than the income earnt.”

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