Bitcoin’s $65,000 Struggle: Miners, Holders, and the Battle for Profitability

TLDR

Some analysts point to Bitcoin miners selling their reserves as a factor contributing to BTC’s recent price drop below $65,000.
Miners have sold over 30,000 BTC since October, marking the longest distribution phase since 2017 and adding to headwinds for the cryptocurrency.
The ongoing miner profitability crisis, known as miner capitulation, is seen by some as a “market top indicator,” while others view it as a potential buy signal if the hashrate recovers.
Despite the price dip, research shows that the majority of Bitcoin holders remain profitable, with over 87% of the circulating supply held in profit.
The retail crowd is not yet dominant in the current Bitcoin market cycle, suggesting potential for further upside, but fear among holders persists.

As Bitcoin struggles to maintain its footing above the $65,000 mark, analysts are pointing to various factors that could be contributing to the cryptocurrency’s recent price dip.

One of the most prominent theories suggests that selling pressure from Bitcoin miners is weighing on the market, with data showing that miners have sold over 30,000 BTC of their reserves since October 2022.

According to on-chain analyst James Van Straten, this period marks the longest distribution phase for miners since 2017, adding to the headwinds faced by the world’s largest cryptocurrency.

How I currently see it

We are currently 33 days into a #Bitcoin miner capitulation, with the average duration over the past five years being 41 days.

Miner addresses collectively hold a substantial treasury of 700,000 BTC, but their balance has decreased by 30,000 BTC since… https://t.co/FM7A7sgfcp pic.twitter.com/iM42LXVDYx

— James Van Straten (@jvs_btc) June 17, 2024

The selling pressure is believed to be driven by profitability issues, particularly among inefficient miners following the April halving event, which reduced the block reward from 6.25 BTC to 3.125 BTC.

The ongoing miner profitability crisis, known as miner capitulation, has been a topic of debate among market analysts.

Some, like Quinn Thompson, CIO of crypto hedge fund Lekker Capital, view the current situation as a “top indicator for crypto” and consider it worse than the miner crisis experienced during the 2022 crypto winter.

What is a better top indicator for crypto than all BTC miners getting indiscriminately bid up on the coattails of AI and $NVDA? Yes there are a few names like $CORZ where this is a legitimate opportunity and probably not to be faded, but for most this is a pipe dream amidst a…

— Quinn Thompson (@qthomp) June 18, 2024

Others, such as analyst Willy Woo, believe that the BTC price will continue to be “punished” until the hashrate, a measure of the computing power used to mine Bitcoin, improves.

#Bitcoin price will continue to be punished until the hash market picks up some volume.

This is why bankers used to call it drug money. https://t.co/tswxQwxlc1 pic.twitter.com/lt9SL8iKEe

— Willy Woo (@woonomic) June 18, 2024

Despite the concerns surrounding miner capitulation, research from analytics firm Glassnode suggests that the majority of Bitcoin holders remain in a profitable position.

The firm’s latest newsletter, The Week On-Chain, reports that over 87% of the circulating supply is held in profit, with a cost basis below the current spot price.

The market value to realized value (MVRV) metric indicates that, on aggregate, a given amount of BTC is still up by more than 120% compared to its purchase price in U.S. dollar terms.

Glassnode also notes that the current market structure is primarily dominated by long-term holders, forming a solid price support base. This, combined with the relative scarcity of short-term holders, suggests that an abrupt transition to a bear market is less likely, and there is still potential for a significant rally before the cycle top formation.

However, not all indicators paint a rosy picture for Bitcoin. Data from Santiment reveals that BTC holders experienced the biggest 3-day drop in non-empty wallets, coinciding with the recent price slide.

???? Bitcoin holders have just had their biggest 3-day drop in non-empty wallets since just prior to the March 14th all-time high. Unlike then, BTC has been sliding, provoking traders to liquidate for fear of further drops. Meanwhile, Ethereum wallets keep growing in number. pic.twitter.com/UIfXLkJ1HH

— Santiment (@santimentfeed) June 18, 2024

This could encourage traders to liquidate their holdings out of fear of further price drops, adding to the selling pressure in the market.