Bitcoin (BTC) miners have suddenly started moving their BTC holdings to crypto exchanges, signaling a possible reversal in the price momentum that has been rising for months.
According to a Sunday post from SignalQuant – a writer at Bitcoin analytics firm CryptoQuant – making a “smart investment” may require paying attention to miners' short-term behavior.
The importance of miner deposits
Miners are the first recipients of all new BTC issued by the Bitcoin network, as well as all transaction fees paid by users. As such, they are the ultimate dictators over whether new coins enter the market's circulation or remain dormant.
“Miners have historically been one of the largest whales, and when they deposit large amounts of BTC to exchanges, the price experiences significant downward pressure,” SignalQuant wrote in its analysis.
CryptoQuant voters unanimously voted for miners selling coins as a bearish indicator.
BTC price vs miner deposits. Source: CryptoQuant
The analyst pointed to mid-May 2023, when a surge in miner deposits was followed by a gradual decline in the price of Bitcoin from around $27,000 to $25,500 by mid-June. This came after a two-month Bitcoin rally above $30,000, inspired by a combination of US bank failures and excitement over ordinals.
Today, BTC is facing a similar situation: Having now surged above $45,000 in light of the impending approval of Bitcoin spot ETFs, miners have dumped hundreds of millions of dollars into BTC over the past week.
The selloff is the biggest since May and reflects a similar sign of profit-taking by miners at a time of particularly lucrative BTC prices.
Likewise, it follows a period of high ordinals activity that has driven up network transaction fees and given miners a whole new major source of profit. In January, fees from the world's largest miners averaged 1.73 BTC per block – a 27% bonus over their standard block subsidy of 6.25 BTC.
At the end of last month, Bitcoin surpassed $100 million in cumulative fees.
Is Bitcoin about to explode?
Unlike SignalQuant, Matrixport recently estimated that Bitcoin could rise above $50,000 this month after ETF approvals sparked a wave of capital seeking BTC.
“Institutional investors cannot afford to miss a potential renewed rally and therefore must buy immediately when markets open for trading in 2024,” the crypto platform wrote on Monday. “We expect an immediate recovery that will once again surprise investors.”
By the end of the year, Matrixport expects Bitcoin could reach $125,000 – similar to Standard Chartered's price prediction last year of $120,000.
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