The all-time high hash rate and mining difficulty suggest that miners are bullish on bitcoin, so the recent sell-off could be a means of hedging their positions.
Mining companies adopt risk-reducing strategy to sell BTC to exchanges.
The latest newsletter from cryptocurrency trading platform Bitfinex discusses the bitcoin mining industry in detail, highlighting the recent surge in miners selling large amounts of BTC to exchanges. As institutional interest in 2023 BTC gradually increases, the stock values of bitcoin mining companies have risen accordingly.
The report notes that Poolin has sold the most BTC to the market in recent weeks, and Bitfinex analysts also note that the difficulty of bitcoin mining has recently reached an all-time high, which is generally seen as an indicator of the “robustness of the mining industry and the confidence of miners,” according to the report. This is generally seen as an indicator of “the robustness of the mining industry and miner confidence,” the report reads:
The report goes on to note that miners are hedging their positions on derivatives exchanges, with cumulative 30-day transfers reaching 70,000 BTC in the first week of July 2023 alone.
While miners have often hedged large spot positions in the past by using derivatives to transfer BTC to exchanges, Bitfinex’s report calls the current high volume an anomaly:
Bitfinex also cites data from Glassnode that the Poolin mining pool is largely responsible for this activity, and that they are dumping large amounts of BTC into CoinShares.
Analysts have noted that there could be several plausible reasons behind the recent mining behavior. These could include hedging activity in the derivatives market, executing over-the-counter orders, or transferring funds through exchanges for other reasons.
The increased difficulty of mining also suggests that new mining forces are being added to the Bitcoin network. Analysts suggest that both the increase in the BTC price and the hardware improvements, whether due to the increase in the BTC price or not, are seen as a sign of increased network health and a reflection of increased confidence in the profitability of mining.
The report also suggests that the movement of bitcoin up the chain reflects a shift in supply from long-term holders to short-term holders. This investor behavior is typically seen in bullish conditions, as new traders in the market seek quick profits, while long-term holders take advantage of rising prices to realize profits.
Cointelegraph has contacted several mining companies and pools to determine why the outflow of bitcoin from mining pools has increased over the past month. According to a recent report, miners transferred more than $128 million in revenue to exchanges at the end of June 2023.
