Analysis of the decline in the price of Bitcoin in USD: blame the miners

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According to Bitfinex’s analysis, the drop in the price of Bitcoin below $40,000 can partly be attributed to the selling of reserves by miners.

After the approval of the new ETFs on Bitcoin spot in the USA, the price had even risen to $49,000 for a brief moment on the day of their launch on the markets, but later it seemed to have stabilized around $43,000. By the way, this is also the current share. 

Instead, starting from January 18th, there was a descent that first brought the price below $42,000, down to $40,000, and then on the 23rd of the same month it even brought it below $39,000. 

Analysis of the role of miners and their impact on the price of Bitcoin in USD

In the Bitfinex report, analysts from the famous crypto exchange claim that they attribute a large part of this decline to the selling by miners, who would have taken advantage of the previous price increase to exit or to exploit previously acquired positions.

It should be noted that until mid-October, the price had not significantly exceeded $30,000 during 2023, while on the 24th of the same month it had even jumped above $34,000, setting a new annual record. 

In November, the upward trend continued to the point that at the beginning of December it had even exceeded 40,000 USD. 

The analysts at Bitfinex add that miners are inclined to sell in anticipation of the upcoming halving of their reward, with the so-called April halving which will bring it from 6.25 BTC per block to 3.125.

This will necessarily imply a sharp reduction in mining profitability, and current sales would provide the capital to upgrade infrastructure in anticipation of the halving. 

In fact, the reserves of BTC miners have significantly decreased right after the approval of ETFs, and last week there was a new surge in outflows from miners’ wallets. This suggests that there could soon be more sales. 

In other words, the miners did not sell all their reserves in mid-January, and if the price becomes convenient again for selling, it is possible that they will proceed with further sales. 

The problem of miners

Miners have a problem: the Bitcoin network will go from distributing an average of about 900 BTC per day, as rewards for validating blocks, to only 450. 

In reality, miners also collect fees, but they are much less.

How will they solve this problem. 

Actually, it is an unsolvable problem, but it is widely anticipated, so they have definitely already thought about countermeasures. 

Most likely they will simply turn off the older and less efficient mining machines, which generate higher costs compared to lower revenues, and replace them with new, more efficient machines that reduce operating costs. 

In order to purchase the new machines, they are selling part of the BTC they have accumulated over time, taking advantage of the high prices. 

Taking as a reference the MARA (Marathon Digital Holdings) title on Nasdaq, which is one of the largest publicly traded Bitcoin mining companies in the world, the price of its shares at the end of 2023 went from $8 in mid-October to $31 on December 27, with an incredible +187% in just over two months. 

During 2024, however, it has dropped significantly, falling below $17 on January 24th. Now it is just above $17. This 45% decrease is much larger than the slight decline in the price of Bitcoin in recent weeks, and is probably due to concerns about the halving

The optimistic picture

However, Bitfinex’s report paints an overall fairly optimistic picture. 

In fact, he adds that the majority of existing BTC has recently remained dormant, indicating that long-term holders are currently inactive.

Furthermore, they suggest that there have been significant movements of BTC from more recent owners (category 1-2 years), which historically has often preceded a potential peak. Despite this, the market still appears resilient. 

Even traditional markets are showing resilience, to the point that the general sentiment seems to continue to be positive. 

This also applies to the economy, particularly that of the USA, and in such a scenario, there don’t seem to be any signs of an imminent collapse. 

This does not mean that if the price of Bitcoin were to become interesting for sales again, miners could decide to liquidate other reserves to finance the replacement of machines in view of the halving.