Bitcoin on-chain data has recently revealed that miners have been offloading BTC as revenues shrink. Factors contributing to this selling pressure include the decrease in earnings due to a cooldown in Ordinals activity and an all-time high in mining difficulty and hash rate. On-chain analytics firm Glassnode reports that miners have been sending a significant amount of coins to exchanges.
The increase in Bitcoin mining difficulty, which measures how hard it is to find a new block in the blockchain network, has reduced miners’ earnings and could be responsible for their increasing losses. Mining competition has also been on the rise, with the network’s hash rate reaching a new all-time high of 381 exahashes per second on June 11.
Further contributing to the reduced earnings for miners is the decline of Bitcoin Ordinals activity, which led to a drop in fees paid for their inscriptions. Data from Glassnode shows that the seven-day average earnings of miners fell from $33.9 million in May to $25.8 million at the start of June.
June also marked the beginning of summer, with higher temperatures in the Northern Hemisphere potentially impacting mining farms due to increased electricity costs. In 2022, summer heatwaves in Texas prompted miners to temporarily shut down operations, and this issue could worsen in 2023, resulting in a downturn in the network’s mining hash rate.
With the current cost of producing Bitcoin ranging between $35,532 and $21,244, and Bitcoin’s price holding above $25,000, the downtrend in the mining hash rate might be limited. However, if mining costs rise without an equivalent increase in BTC price, the industry could enter capitulation mode, marked by accelerated BTC selling and a reduction in the network’s hash rate.
Despite the growth of Bitcoin’s hash rate, the hash price metric—representing the market value assigned per unit of hashing power—has seen a significant decline in May. This suggests a cooldown in demand for mining hardware. As the sell-off continues, it remains uncertain whether Bitcoin Ordinals activity will recover in the meantime.
Bitcoin’s future hangs in the balance as these factors play out. Ultimately, the outcome depends on whether miners can maintain profitability amidst rising costs and declining earnings. If not, the industry could face another period of capitulation and reduced network hash rates.
Source: Cointelegraph
