How the great Bitcoin Miner migration impacted the market
Bitcoin could be at one of the most important times in its history. The mining sector located in China has been forced to migrate due to new regulations. These entities are responsible for protecting the network and their actions can be felt across the crypto industry.
As a result, there has been an increase in selling pressure in recent months and a decrease in Bitcoin mining difficulty, down 27.94%. As more miners go offline, the Bitcoin hashrate has taken a hit.
Glassnode Insights analyst Checkmate took a closer look at the impact this event had on the crypto industry. First, it highlights the increase in volatility in specific mining metrics: hash power, block intervals, and production.
The analyst claims that the BTC network’s difficulty adjustment experience has been one of the most significant in the past decade. The mining sector is at the “average chopping power observed over the 2016 difficulty window”.
Additionally, the network has experienced some of its slowest average block time since Bitcoin launched in 2009, based on the average block interval for a 24-hour moving average. Checkmate mentionned:
this was the slowest average block time since the cypherpunk era of 2009, when Bitcoin didn’t even have a market price. The previous longest average block time of 1,774.5 seconds occurred at the bottom of the final setback before the top of the 2017 explosion.
At one point, the analyst estimates that the network has around 180 PE / s. In total, it lost 38% to 49% of its hash power and went from its stabilization points at 88 EH / s to 110 EH / s. The local minimum was 65 EH / s, as seen below.
How Bitcoin Miner’s migration could indicate a bullish reversal
Contrary to the belief spread by some experts when correcting the prices of this BTC, Checkmate claims that the market “has yet to see a significant increase in the spending behavior of miners.” The speed of hashrate recovery could be used to measure the spending behavior of miners.
The analyst claimed that if the market experiences a rapid recovery, it is possible to assume that the risk of miners selling BTC will decrease. They might find new places to set up their operations, sell equipment, or find other ways to cover their costs. This could allow Bitcoin to recover and return to previous highs.
On the contrary, if the hashrate recovery is prolonged, miners may have a greater incentive to reduce their BTC holdings and cover their operational costs. Checkmate added:
For most of the history of Bitcoin trading, miners have consistently spent more coins than they accumulated, so the unspent supply was in a structural downward trend. This means that miners historically spent more coins than they accumulated.
The Difficulty Tape, a metric used to measure the links between changes in network difficulty and miner selling pressure, suggests good news for bulls. This indicator has returned to the levels previously observed during the 2018 stock market capitulation.
The analyst pointed out that a reversal in the ribbon of difficulty is an “extremely rare event”. However, this usually happens at the end of bear markets or, in this case, could suggest the end of the downtrend in the price of Bitcoin in the past two months.
This is the result of miners turning off machines that cost more than they earn and that are historically correlated with strong bullish market reversals.
At the time of writing this article, BTC is trading at $ 33,611 after being rejected in the $ 35,500 area. The cryptocurrency has losses across the board and could experience another downside if it continues to test its current support levels.