Bitcoin reserves held by miners have surged to their highest level in over two years, raising concerns about a potential decline in Bitcoin’s price.
Historical patterns suggest that when miner reserves reach significant levels, it often precedes a downturn in the cryptocurrency market, according to a recent report by CryptoQuant.
Per the report, miner reserves on over-the-counter (OTC) desks have seen a massive increase, hitting a level not observed since June 2022.
Bitcoin Miner Reserves Reach 368,000 BTC
More specifically, the surge has brought miner reserves to a total of 368,000 Bitcoin, valued at approximately $22.36 billion.
“Historically, increases in Bitcoin OTC desk balances have been associated with declines in Bitcoin prices,” the CryptoQuant report noted.
The 70% surge in miner OTC balances over the past three months suggests that miners might be preparing to sell large amounts of Bitcoin, which could exert downward pressure on the market.
The report draws parallels to previous instances where high miner reserves were followed by sharp price declines.
For example, in May 2018, when miner OTC balances exceeded 400,000 BTC, Bitcoin’s price was around $8,475.
By December of that year, the price had plummeted by 63% to $3,183. A similar pattern occurred in November 2021, when Bitcoin was trading at approximately $64,000 and miner reserves were near an all-time high of 500,000 BTC.
Within two months, the price had dropped by 45% to $35,058.
Miners Use OTC Desks to Sell BTC
Miners often use OTC desks to sell their Bitcoin as these platforms offer higher liquidity and “better execution” compared to traditional exchanges.
By avoiding selling on exchanges, miners can mitigate the impact on Bitcoin’s market price.
However, the current high reserves indicate significant selling activity may be on the horizon.
Despite these concerns, there are factors that could counterbalance the potential selling pressure.
A recent decline in Bitcoin supply on exchanges and the accumulation of 94,700 BTC by large holders, known as whales, over the past six weeks may provide some support to Bitcoin’s price.
The development comes amid rising operational costs for miners and reduced rewards following the Bitcoin halving in April.
Currently, the average cost to mine a Bitcoin stands at $72,224, while the cryptocurrency’s price hovers around $60,797, according to data from MacroMicro and CoinMarketCap.
The disparity has led many miners to operate at a loss.
Bitcoin commentator Colin Harper highlighted the challenges faced by miners in a recent post, noting that “every miner earned less in Q2 than Q1.”
However, he also pointed out that some miners have managed to offset revenue declines by expanding their hashrate and upgrading their equipment.
As reported, Iran is taking measures to combat illegal cryptocurrency mining as the nation grapples with power shortages exacerbated by a severe heatwave.
The government is offering financial incentives to citizens who report unauthorized crypto-mining activities, with rewards of up to 1 million toman (approximately $24) per tip.
The post Bitcoin Miner Reserves Reach Two-Year High — Price Decline Looms appeared first on Cryptonews.
