In recent weeks, BTC miners utilizing Antminer S19 series ASICs have sent a record amount of Bitcoin to exchanges, coinciding with the network’s difficulty metric reaching an all-time high. The Bitcoin mining difficulty, which measures the level of difficulty in mining new blocks, recently peaked at 53.91 trillion units following the latest adjustment on July 12.
The blockchain adjusts its difficulty every two weeks to maintain an average block processing time of 10 minutes. When the network’s processing power increases, the difficulty adjusts accordingly to make mining more challenging, thereby reducing profitability for individual miners.
The latest difficulty adjustment adds further pressure on miners who have been actively selling their mined BTC since June. Analysts suggest that the lack of miner accumulation has likely prevented a significant uptrend in the BTC price.
As a result of the increased difficulty, the profitability of medium- and small-scale miners using Antminer S19 series ASICs is expected to drop into negative territory, leading them to temporarily deactivate some of their mining hardware.
The potential capitulation of weaker miners may present an opportunity for larger miners to accumulate Bitcoin, potentially reducing the overall selling pressure from the mining community.
The hash ribbon indicator, created by independent analyst Charles Edwards, monitors the 30- and 60-day moving averages of the network’s hash rate. A crossover, where the 30-day moving average falls below the 60-day moving average, signals a potential miner capitulation, indicating that unprofitable miners are exiting the market. The hash ribbon indicator is marginally close to a crossover, and the recent increase in difficulty could serve as the catalyst for weaker miners to capitulate.
If miner selling ceases due to the potential capitulation of weaker miners, Bitcoin may experience a positive price movement. However, in recent months, miners have been consistently selling significant amounts of BTC to exchanges. A report from K33 Research revealed that publicly listed miners sold more than 100% of their output in May. The cumulative transfer volume of BTC from miner wallets to exchanges also spiked to a six-year high in June and July.
While miners have been selling their Bitcoin, on-chain analytics from Santiment indicate that Bitcoin whales, holding significant amounts of BTC, have been accumulating more since June 17, adding $2.15 billion to their holdings. Additionally, the amount of Bitcoin held by exchanges has dropped below 2017 levels, suggesting that investors are moving their BTC off exchanges and contributing to the growth of Bitcoin’s illiquid supply.
Despite the accumulation of Bitcoin by whales, the price of BTC has remained relatively suppressed within a narrow range of $29,500 to $31,500. This stagnation could partially be attributed to the selling pressure exerted by miners.