Massive outflow of Bitcoin miners signals impending market weakness

It’s been a long time coming. After the Bitcoin halving event on May 12, many in the cryptocurrency space suggested that weaker miners would exit the market, leaving the majority of the hash rate to stronger players.

However, according to the Bitcoin protocol, the Bitcoin network’s hash rate adjusted itself negatively, meaning that the mining difficulty would drop significantly, a move that would allow “weaker” entities to start mining Bitcoin again and profitably.

However, they appear to have run out of funds for operations. According to on-chain data, miners are preparing to realize their profits and potentially shut down operations if research from some sources is taken into account.

Large-scale outflow of Bitcoin from mining pools and individual miners

Research firm CryptoQuant noted on Twitter that two miners had seen significant Bitcoin outflows this week.

Data shows that the two mining pools HaoBTC and Poolin will transfer a large amount of Bitcoin. Poolin is one of the largest mining pools in the world. As of June 25, the two fund pools have outflowed 7,153 BTC, which is about 65 million US dollars at the current price.

According to data on BTC.com, Poolin mined 158 blocks in the past week, second only to F2Pool’s 187. But HaoBTC did not make the top 20.

Data shows that public Bitcoin accounts of popular cryptocurrency exchanges do not show a significant increase in total holdings, suggesting that these Bitcoins were likely sold through over-the-counter (OTC) Bitcoin exchanges. There are many such companies in Asia, such as OSL in Hong Kong and QCP in Singapore.

Still, data from Glassnode shows that around 2,900 bitcoins have been deposited on cryptocurrency exchanges, originating from miners’ personal wallets.

Bitcoin outflow chart source: Glassnode

Miner Bitcoin Exodus Precedes Sharp Price Drop

As Xiaotian reported earlier this month, miner outflows initially spiked in the week following the Bitcoin network’s block reward halving but have been declining.

At the time, public data showed that miners sold more Bitcoin than they earned over a period of time, presumably to cover costs and protect against future risks.

Meanwhile, some traders said on Twitter that outflows from miners contributed to the drop in cryptocurrency prices on June 25. At the time of writing, Bitcoin was down 4% and ETH was down 6%.

Trader Cole Garner shared a chart on Twitter and wrote: “Miner outflows spiked significantly overnight. 2nd largest amount since Bitcoin broke $10k. I expect a lot of selling to start soon.”

Bitcoin Price and Miner Capital Outflows Cole Garner

Commentators have claimed that past Bitcoin outflows from miners have preceded significant price declines. However, there is no statistically significant data or metrics to support this claim.

In early June, Glassnode’s data on Bitcoin’s miner outflow multiple (MOM) showed that the relevant metric reached a one-year low when considering the 365-day moving average.

Fund manager Tuur Demeester wrote on Twitter at the time: "Healthy Bitcoin miners are hoarding, while struggling miners have almost no remaining Bitcoin to sell. This is optimistic." (Baijiahao)