Bitcoin (Bitcoin) Tuesday plunged 7.38% to a five-month low of $29,313 as the market is staring at the prospect of another sell-off, this time caused by miners who have recently cracked down on cryptocurrency entities in China.
People’s Bank of China Monday Say It has convened a number of regional institutions including the Agricultural Bank of China, China Construction Bank, and Industrial and Commercial Bank of China, as well as Jack Ma’s payment platform Alipay, to “strictly implement” its recent efforts to curb Bitcoin and other cryptocurrency-related activities (including Mining).
According to Chinese media reports on Friday, Sichuan Province, which is rich in hydropower resources in Southwest China, ordered 26 of the largest encryption mines to cease operations. The province contributes 75% of the total global computing power to the operation of the Bitcoin blockchain network.
The regulatory warning was issued after the Bitcoin market fell. With the support of prominent advocates including Tesla’s CEO, the Bitcoin market was trading at close to $65,000 in mid-April. Elon Musk.
Miners surrender FUD
A kind Report released by Glassnode It reveals the “seismic mining shift” that is taking place in China. The data analysis platform pointed out that many miners are shutting down or migrating their computing power outside of China to comply with the mining ban.
“One of the largest Bitcoin hashrate migrations in history seems to be underway,” Glassnode wrote, adding that the estimated average hashrate (7DMA) dropped from about 155 EH/s to about 125 EH/s in just two years. s China FUD (the antonym of fear, uncertainty, and doubt) in a few weeks.
Glassnode predicts that China’s mining industry may liquidate some of its bitcoin holdings when it handles moving farms abroad or selling hardware. These sell-offs may reflect “miners hedging risks” and “obtaining capital to promote and fund logistics.”
The report added that at the same time, for some miners, this may be a complete exit from the industry.
Recent on-chain trends indicate that the distribution of BTC by miners has increased sharply, while the accumulation of BTC has decreased.
For example, the miner net position change indicator that tracks the transaction flow of Bitcoin mining pools shows that during the period when the hash rate drops by 16%, miners distribute BTC at a rate of 4K to 5K per month.
“This reverses the trend of active net holdings since April.”
Large investors absorb off-site distribution in the mining industry
As long as the market absorbs the selling pressure, the miners’ surrender is not necessarily a bad thing. In the first quarter of 2021, even if miners sold a large amount of their Bitcoin holdings, the BTC/USD bids rose from as low as 28,700 U.S. dollars to 61,788 U.S. dollars.
Jonathan Ovadia, CEO of South Africa-based cryptocurrency exchange OVEX, drew evidence from MicroStrategy’s ongoing Bitcoin holdings frenzy and attributed the latest sell-off absorption to institutional investors. He says:
“Institutional investors, especially MicroStrategy, continue to increase their holdings of Bitcoin based on their belief in potential future upsides beyond the current adjustments.”
At the same time, take a look Over the counter (OTC) counter, Miners use it to match its large-scale distribution with institutional buyers, and it also shows a large number of buyers’ needs.
Glassnode observed: “During the May sell-off and the past two weeks, a net inflow of 3,000 to 35,000 bitcoins was observed.” “However, in both cases, buyers absorbed almost all in just a few weeks Inflow.
As a result, the Bitcoin balance of over-the-counter transactions has been relatively flat since April.