Bitcoin miners have commenced the sale of BTC, exerting potential downward pressure on the price of Bitcoin. The on-chain data of Bitcoin reveals a significant trend of miners offloading their holdings. 

Several factors contribute to this selling pressure, including diminished earnings resulting from a cooldown in Ordinals activity, mining difficulty, and a hash rate reaching unprecedented levels.

According to Glassnode, a renowned on-chain analytics firm, there has been a substantial increase in the number of coins being sent to exchanges by miners. This surge in inflows reached a three-year peak on June 3, reminiscent of levels observed during the bullish period of early 2021.

Additionally, Coin Metrics data indicates a decline in the one-hop supply metric of miners. This metric measures the quantity of Bitcoin stored in addresses that receive coins from mining pools. It has displayed a consistent upward trajectory in miner holdings since May 2023. However, the trend of accumulation by miners reversed during the second week of June.

One-hop supply of Bitcoin miners. Source: Coin Metrics

Increase in mining difficulty and reduced Ordinals activity

The mining difficulty of Bitcoin, which represents the level of complexity in discovering a new block within the Bitcoin blockchain network, reached an unprecedented peak at the beginning of June.

Bitcoin’s mining difficulty undergoes regular adjustments to maintain an average block time of approximately 10 minutes. When the computational capacity of the network increases, the difficulty level is raised to ensure that mining becomes more challenging. Conversely, if the capacity decreases, the difficulty is reduced.

The adjustment in difficulty takes place after every 2,016 blocks, corresponding to roughly two weeks. It is determined based on the total computational power, known as hash rate, within the network. The most recent adjustment occurred on May 31, resulting in a significant 3.39% increase in the overall difficulty level.

Bitcoin mining difficulty. Source:

The surge in Bitcoin’s mining difficulty has a detrimental effect on miners’ profitability, potentially leading to increased losses. The rise in difficulty directly impacts miners’ earnings, making generating profits more challenging.

Furthermore, the competition among miners has intensified following the recent difficulty adjustment. The network’s hash rate reached an all-time high of 381 exahashes per second on June 11. This heightened competition among miners contributes to the selling pressure within the market. 

Another factor contributing to miners’ reduced earnings is the decline in Bitcoin Ordinals’ activity, significantly boosting miner revenue. In May, the total fees paid for Ordinal inscriptions on Bitcoin dropped to a two-month low. Similarly, trading volumes on nonfungible token (NFT) marketplaces exhibited a downward trend.

Glassnode data reveals that miners’ average earnings over a seven-day period declined from a peak of $33.9 million in May to $25.8 million at the beginning of June.

The 7-day moving average of Bitcoin miner revenue (orange) and BTC’s price (black). Source: Glassnode

Identifying miners’ stress levels

The production cost of Bitcoin using current mining hardware ranges from $35,532 to $21,244. With the price of Bitcoin remaining above $25,000, the decline in Bitcoin’s mining hash rate may be limited.

Nevertheless, if the situation deteriorates during the summer and the mining cost rises without a corresponding BTC price increase, the industry could enter a state of capitulation. This phase would be characterized by intensified selling of BTC and a decrease in the network’s hash rate.

Bitcoin price chart with production cost indicator. Source: TradingView

In addition, despite the continuous increase in Bitcoin’s hash rate, there has been a notable decline in Bitcoin’s hash price metric. This metric represents the market value assigned to each unit of hashing power. The decrease in May indicates a cooling down in demand for mining hardware.

According to the latest update from Hashrate Index, the hash price per petahash per day (PH/day) has dropped below $70.00 for the first time since mid-March. In May, it had reached an average of $82.23 per PH/day, marking a significant decline of 14.8%.

Disclaimer: This article does not provide investment advice or recommendations. Every investment and trading decision carries risks, and readers should research before making any decisions. The purpose of this article is to offer general information and should not be interpreted as legal or investment advice. The opinions and views expressed in this article are solely those of the author and do not necessarily reflect the opinions and views of Copaly.