The number of Bitcoins (BTC) held by crypto miners has fallen to its lowest level since July 2021 as they deplete their coin supplies ahead of the planned halving of revenue earned per block.
Data collected by Glassnode shows that the estimated number of BTC held in wallets tied to miners has decreased by 8,426 BTC ($530 million) since the beginning of the year to 1,812,482 BTC. The decline began in the second half of October when miners held over 1.83 million BTC.
Miners create valid blocks and add transaction records to the public ledger or blockchain. With each block, new coins are issued, which are given to miners as a reward for their work. You also receive transaction fees.
Currently, miners receive 6.25 BTC per block. The halving, a quadrennial event scheduled to take place in April, will reduce this number to 3,125 BTC and reduce revenue per block by 50%. To improve profitability, miners could use their stored BTC to purchase more efficient equipment, reducing operating costs, said FRNT Financial, a Toronto-based crypto platform.
“Miners may also be inclined to sell to better position themselves ahead of the halving,” FRNT Financial said in a Tuesday newsletter. “This may require the purchase of more efficient mining equipment as the halving will bring new economic aspects.”
The halving is widely seen as a stress test for miners as it is expected to reduce revenue while increasing production costs. Industry consolidation is possible.
The ongoing dry season in southwest China, which typically lasts from October to March/April, could be another reason for the decline in miners' Bitcoin balances. China accounts for about 20% of the total computing power in the Bitcoin network.
“Miners in some Chinese regions have been known to bring additional hardware online during the rainy season, when hydropower is abundant. It is conceivable that miners sell during the dry season to counteract the inactivity of mining hardware,” said FRNT Financial.
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