Soon after Bitcoin (BTC) crossed $14,000 last Saturday, it has been under pressure and has corrected 500 points since then. Over the last week, Bitcoin miners have kicked-off the selling spree while liquidating their inventory of over 1000 BTC.
Bitcoin miners sold a lot of Bitcoin in the past week. According to ByteTree, a net inventory change of -1,060 BTC.
This would have placed decent selling pressure on the cryptocurrency exchange market. If the sell-off from miners slow down as a result, lower selling pressure.
— Joseph Young (@iamjosephyoung) November 3, 2020
Some of the cryptocurrency analysts have been already pointing at the BTC correction in this short term. It has been the end of the rainy season (April-October) in China’s miner-dominant Sichuan region. Thus, many miners prefer switching off their rigs that results in a significant hashrate coming offline.
By the end of October, the Sichuan-based miners usually tend to move to other northern regions of China like Xinjiang and Inner Mongolia due to the region’s competitive electricity rates.
The Transiting Hash Rate Results In Drop Of Mining Difficulty
Since the last mining difficulty adjustment last month on October 18, the Bitcoin price has surged by 20%. John Lee Quigley, director of research at HASHR8, said that it’s going to be a great time ahead for miners as the difficulty is like to drop by 15%. In a note published on Monday, November 2, Quidley writes:
“The next difficulty epoch will be an extremely lucrative period for Bitcoin miners as blocks will likely be much faster, bitcoin price may remain elevated, and input costs will significantly drop”.
He further explained that miner profitability has significantly surged over the last month. However, the revenue growth still remains blunt with slower block times. But as the input costs of mining drop considerably, Quigley expects a significant hashrate to come back online as “a myriad of inefficient miners will be able to mine profitably again,” he says.
As more hashrate comes online, it will reduce the block times thereby increasing profitability for miners. The transition between Sichuan and northern China usually takes around one week and thus as more hashrate comes online, we can expect the Bitcoin (BTC) price to surge ahead. However, we can see short-term pressure on the Bitcoin price until the rigs go online again.
An increase in price is usually followed by an increase in hash rate, but for now miners are sitting on more expensive bitcoin and cheaper mining, a very lucrative situation.
— Zack Voell (@zackvoell) November 3, 2020
America’s Bitcoin mining giant Marathon Group is piling up the inventory and has put massive orders for the Bitmain Antminer S19-Pro to make the most of this situation.