Losing Miners and Possible Bitcoin Downward Spiral: Implications of the FTX Case


The bankruptcy of FTX, which was the third largest cryptocurrency exchange in the world, affects the bitcoin market and the digital asset. Falling prices ended up squandering what little profitability mining still generated. This could lead to a downward spiral of BTC sales from miners’ reserves.

From FTX case bitcoin came to light in early november had a loss of $21,000 to $16,000 area. This is a decrease of more than 23 percent.

in 2022 in June, CriptoNoticias observed the risk of a possible “negative bitcoin price spiral” due to Fall of Terra USD and LUNA Tokens. It was explained how bitcoin was dangerously close to cost of production, about $19,000 at the time. If it falls below this price, miners would have a negative return, which could lead to massive selling.

A negative spiral refers to a hypothetical situation where miners, In desperation due to falling prices, they start selling their BTC at a loss. This, in turn, does lower the price even more assets, thus driving more sales.

Now, 5 months later, and for reasons other than Terra and LUNA falling, the price of each bitcoin has finally fallen below the cost of production threshold according to the charts. is shown with Glassnode.

It is observed there that miners in general since November 10. cash register with negative returns.

Glassnode’s difficulty regression model shows the approximate cost of producing 1 BTC based on current mining difficulty. Font: Glassnode.

Bitcoin miners pressured to sell

This Bitcoin price situation has a direct impact on miners’ reserves. Chain metrics show that they have already started selling some of their BTC reserves to cover operating costs from mining farms.

In recent months, miners’ bitcoin stocks have gone up and down, indicating strong selling pressure. Source: TradingView.

The graph above shows how the BTC reserves of all mining pools are decreasing:

As can be seen from the signature graph To the block, miners sold more than 300,000 on the TradingView platform. BTC own reserves, only at the beginning of November. From October to November miners’ BTC reserves have reached their lowest point. According to this indicator, miners have about 1.9 million bitcoin reserves.

Also an indicator that follows selling pressure (ie represents the amount of bitcoins sold by miners in excess of the amount of bitcoins mined) This shows that they are being sold 3 times more than they are being produced since the FTX crash.

Miner selling pressure has increased by 394% over the past 3 days, indicating that more and more BTC inventory is entering the market. Source: TradingView.

Charles Edwards, founder of Capriole Investments, developer of Miner Selling Pressure Indicator, my that the current situation is a “bloodbath”. He commented that “if the price [de bitcoin] won’t increase anytime soon, we’ll see a lot of Bitcoin miners go out of business.

Lower profitability but more miners in the network

Added to this bear market is a fall in the hash price, which is a return of 1 TH/s (hashrate expressed in terahashes per second) in one day.

The hash price at the time of writing it is around $0.058. It is at its lowest point since October. The fall in this value is not only related to the fall in the price of bitcoin. This also affects the fact that the network’s hash rate grew throughout 2022, set all-time records in recent days.

Bitcoin hash price from October to November. Font: Hashrate index.

As more miners join the network, it means that bitcoins are “harder” to mine. This is because of the settings difficultymetrics that at the time of writing are historical high. This situation has a direct impact on the profitability of miners. More difficulty means less profitability.

Mining rigs like the S19 j pro, which offers 104 TH/s, and with costs over $3,000, provides a negative return (based on electricity costs above $0.12/kWh, which is the state average Texas, United States of America).

Bitcoin hashrate reached an all-time high of 331 EH/s. Font: CoinWarz.

Since May of this year, hashrate has increased by 40 percent. The drop in FTX shell prices doesn’t seem to have had any effect on the number of miners.

according to reported In this environment, miners seem to have developed their own survival strategies that allow them to stay entrenched when prices fall. Some, for example, further mine and keeping BTC is looking forward to profitability in the next BTC growth cycle. In any case, as stated here, there are many who cannot resist and end up selling.

Another strategy was to set up mining farms in countries with cheap electricity, as in the case of Argentina. Average in Argentina electricity price around $0.02 per kWh, 5 times less than the US average.

Paraguay has also presented itself as a “cheap” option for miners looking for it “The Promised Land” for cryptocurrency mining.

It remains to be seen how this story will play out and which Bitcoin mining companies will be able to survive until the end of the current cryptocurrency winter.

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Source: news.google.com

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