Bitcoin (BTC) On-Chain Analysis – Abandoned Miners?

Fierce competition in the deep

Bitcoin (BTC) priceIt is recovering to hover around its 20-period moving average at the $17,000 level.

While participants are torn between loss-taking and intensive accumulation, the mining cohort is not indifferent to the current powerful price depreciation.

Figure 1: Daily price of BTC

Many signs point to that the various mining firms and pools are barely experiencing the turmoil of the 2021-22 bear serieswhich forced the most resilient participants to bow out, in fierce competition.

Today, we will look at the situation of the cohort of miners by studying their contribution to the security of the network (hashrate), their income and the flow of their wallet.

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The last survivor game

After the meteoric rise achieved by the hashrate of the Bitcoin network between August and November, the total hash rate allocated to finding the new block header increased from almost 200 ExaHash/s to an ATH of 272 ExaHash/s on November 12 .

The adjustment of the mining difficulty then put pressure on the competition so that some miners’ income no longer allows them to participate.

Follow one -16.3% drop in hashrateindicating the gradual withdrawal of ASICs and the abandonment (temporary or permanent) of entities wishing to enhance network security.

Figure 2: Bitcoin hashrate

Since November 27, this measure has retraced almost 50% of its fall, hovering around 260 ExaHash/s, andto adjust the difficulty of bearish mining finally manifests.

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Drop in miners income

The financial pressure on miners has steadily increased since November 2021, as they are finally pushing their limits.

At first glance, the USD value of a miner’s daily income (reward and block fees) has fallen in proportion to the price of BTCgoing from $67 million (May 2021) to almost $14 million currently.

Figure 3: Miners’ income (BTC & USD)

This 4.5 split in revenue from block dreams allows fewer and fewer of them to meet their CAPEX and OPEX costs and is part of the reason the machines are not plugged.

As well as that, in terms of BTC, miners also experienced a drop in profitability of around 15% between October and Novemberalthough the underlying trend remains largely constant.

By measuring miners’ income based on the amount of ExaHash produced, we can see that their income has been dropping significantly since mid-2021, both in terms of USD and BTC.

Figure 4: Miner income per ExaHash (BTC & USD)

This multi-cyclical downtrend tends to be more intense during bear markets and the volatile declines in the price of BTC place miners in financial stress difficult to bear.

Currently, if you offer one ExaHash/s to the network for one day, you can withdraw almost 3.5 BTC, or $60,600 at the current price. This is 1.8 times less than it a year ago.

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Miners drop ballast

Miners’ responses to this adverse context can be seen through the associated wallet flows this cohort. Here, BTC determined by Satoshi early in Bitcoin’s life is excluded as they do not participate in the current miner economy, until proven otherwise.

In almost 6 months, the miners total wallet balance decreased from almost 750,000 BTC to around 722,000 BTCwith two significant load loss episodes.

Although the early November drop appears to coincide with the price drop below $18k, the December 1st drop occurred even as the hashrate it started to flow on the network again.

Figure 5: Supply held by miners and daily variation

The latter is also on the same scale in terms of severity as the fall recorded after the profit take at the end of 2020, with a peak in daily withdrawals of almost 10,000 BTC.

It seems that some miners have decided to use some of their money in response to increasing difficulty and falling prices.

Note, however, that it is difficult to accurately measure the simple transfer sales and shares represented by this amount of BTC leaving the miners’ wallets.

Figure 6: Outflows from miners’ wallets (BTC)

The December 1st movement was particularly visible, registering volume out of 10,084 BTC, or almost $172 million in an hour.

This is the biggest pullback of this bearish cycle, even far more than all the outflow values ​​recorded since 2021 except for the January 2021 profit taking.

This says a lot about the overall savings / spending dynamics of miners, which tendency to part with some of their assets when the financial stress reaches the limit of the bearability.

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Summary of the analysis of this chain

In a nutshell, this week’s data tells us just that miners are put under considerable financial stresswhich could force the least resilient players to liquidate some of their BTC holdings.

The recent drop in hashrate has shown that stress is therehash power was (temporarily) removed from the network for a significant number of ASICs.

Studies show earnings in terms of dollars (USD) and bitcoins (BTC). a significant decrease in miners’ incomejeopardizing the financial viability of the operations of several entities in the cohort.

At the end, outflows from miners’ wallets indicate a significant transition phase (possible selling)with record withdrawal on 1 December.

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Sources – Figure 2 to 6: Glassnode

Chain analytics, a fierce fighter of information asymmetry.

My goal is to inform everyone about the state of Bitcoin (as an asset and a distributed network) through the prism of chain analysis.

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