The steep drop in Bitcoin’s price, coupled with a significant rise in mining difficulty, has forced miners to exert considerable effort to keep the network afloat, while those securing the network are compelled to move large sums of money.
Data from blockchain analytics firm CryptoQuant reveals that at the beginning of the month, Bitcoin outflows from miners reached a peak of 19,000 BTC per day—the highest since March.
One factor driving the surge in sales is the profitability of minting new coins, which has become more difficult since the halving event in April. As mining difficulty also continues to rise, miners must work even harder.
Moreover, with Bitcoin’s price dropping below $50,000—as it did on August 5—miners have had to sell more coins to cover their escalating expenses. CryptoQuant reports that the average operational profit for miners has dwindled to 25%, the lowest it’s been since January.
“Indeed, we may have witnessed a miner capitulation event last week when miner cash flow surged after the price momentarily dipped to $49,000,” the company noted. “We may still see miners continuing to sell due to their low compensation amidst low prices and high mining difficulty.”
Bitcoin Exchange-Traded Funds (ETFs) have injected significant capital into the sector, yet the price of the largest digital asset has struggled over the past few months since hitting a record high of nearly $74,000 in March.
According to CoinGecko, the cryptocurrency is currently trading at $60,660. This is largely due to mining difficulty soaring to new heights, making the minting of new coins more challenging than ever.
Bitcoin mining is the process of verifying transactions and minting new coins for the cryptocurrency network. It is a major enterprise, with miners often operating on a large scale, utilizing vast warehouses filled with noisy computers.
Miners are rewarded with Bitcoin for their work, but the halving event in April—occurring every four years—halved these rewards. With mining becoming more challenging, operations must work harder and consume more energy to keep the network running. With low prices, covering costs by selling newly minted Bitcoin becomes increasingly difficult.
However, it’s not all doom and gloom: the crisis might be nearing its end. CryptoQuant noted, “Miner capitulation can often be seen near a local bottom for BTC prices in bull markets.”
