Bitcoin Miners Selling Cryptocurrency May Continue To Pressure The Token’s Price: JPMorgan

According to JPMorgan Chase & Co, bitcoin miners who need to sell could weigh on the price of the token for some time. Bitcoin miners have been forced to dip into their cryptocurrency reserves as falling prices, rising energy costs and increased competition bite into profitability.

The number of coins miners are sending to crypto exchanges has steadily increased since June 7, MacroHive researchers noted, a sign that “miners are increasingly liquidating their coins on exchanges.” Several publicly traded bitcoin miners collectively sold more than 100% of their entire production in May, as the value of bitcoin fell 45%, according to analysis by Arcane Research.

Publicly listed miners, which make up about 20% of the total, have already reported bitcoin selloffs in May and June to boost liquidity, cope with costs and possibly deleverage, JPMorgan strategists said in a note.

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Private miners may have sold more of their block rewards from mining activity to meet ongoing costs and may be less leveraged given their more limited access to capital markets, they said.

“The offloading of Bitcoins by miners, in order to meet ongoing costs or deleverage, could continue into the third quarter if their profitability does not improve,” the strategists wrote. This unloading “has probably already weighed on prices in May and June, although there is a risk that this pressure will continue.”

Cryptocurrencies have suffered this year amid Federal Reserve rate hikes and stubbornly high inflation. The collapse of the Terra/Luna ecosystem and ongoing concerns over hedge fund Three Arrows Capital Ltd. shook investors again.

One thing that could ease price pressures, according to JPMorgan, is a drop in the cost of production from a range of around $18,000 to $20,000 earlier in the year, to around $15,000 this month- this. This seems to be related to an improvement in the implicit energy efficiency of mining equipment and could dampen profitability.

Bitcoin miners, who operate networks of computers to earn tokens by validating transactions on the blockchain, are typically avid crypto “HODLers” and collectively own around 800,000 bitcoins, according to data from CoinMetrics.

The crypto mining space has grown rapidly in 2021 as the value of bitcoin more than quadrupled, but this growth has further weighed on margins as the process is designed to become more difficult as the number of miners increases. increase.

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Bitcoin Miners Selling Cryptocurrency May Continue To Pressure The Token’s Price: JPMorgan


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