Why did miners sell 280,000 BTC before the halving?

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The price of Bitcoin (BTC) has begun to show strength in its recovery since the Black Thursday sell-off, but can we expect this to continue? Or is this just a technical bounce with lower lows to come?

In today’s analysis, I’m not only looking at the charts, but also at the possibility that large Bitcoin miners were responsible for the 50% price drop on March 12. Previously, some data suggested that short-term holders sold 281,000 BTC, causing the price crash.

Did miners sell over 250,000 BTC?

In an article published by Coinmetrics on March 17, on-chain data supports the fact that short-term BTC holders were most likely responsible for the price sell-off.

The data they cite includes 281,000 BTC that were still being moved after being held for 30 days, compared to 4,131 BTC that had not been touched in the year before being moved.

This data may suggest that the FOMO that fueled the 30% price rally in early 2020 was weak. However, one must consider the potential motivations for such a large amount of Bitcoin being sold cheaply.

To me, it is a very real possibility that the rise and fall in the price of Bitcoin are caused by the same person(s).

As shown in the figure below, Bitcoin has been in a downward channel since June 2019. This trend seems to have bottomed out on January 4, 2020 and started a new upward channel.

This new impetus for the price of Bitcoin has been welcomed but not questioned. Why has Bitcoin started to rise? Is it because of the upcoming halving? Is it the increased mining difficulty? Is it new institutional interest? However, putting all of these together is different.

What if miners stopped selling Bitcoin?

Between January 4 and March 12, 1,800 new Bitcoins were mined every day, for a total of 122,400 Bitcoins. That’s almost half the amount that short-term holders could sell, and they wouldn’t have gotten more than the newly mined BTC.

Why did miners cause the market crash?

I don’t pretend to know any facts, this is just a guess based on a lot of data support. Before I continue with my analysis, I will present some reasons why large miners are crashing the market.

• Using leverage to blow up competitors (many smaller miners hedge on leverage platforms like Bitmex);

• Increase its market share before the halving;

• Squeeze out some large market manipulators (PlusToken scammers, institutional investors) before the halving.

I believe these are some plausible explanations, especially considering that computing power was flowing out of China and that it coincided with the outbreak of the COVID-19 pandemic.

This creates an almost perfect environment for a black swan event to both gain market dominance and regain control over price. After all, if miners cannot control price, then the halving will have no impact.

Observe the Bitcoin daily chart

When looking at the daily Bitcoin chart, it is clear that miners are controlling the supply of Bitcoin. The rally at the beginning of the year looks more like a minor bump in the road, and we are now resuming the downward trend that we have been in since the second half of 2019.

Due to the market sell-off, we will never know if the above speculation was correct. However, what is certain is that the price rebounded from the support level of the descending channel at $4,400 as expected in last week's analysis. Therefore, these levels should be used as a reference when looking at the price in the coming week.

Currently, the price is holding above the middle of the descending channel, around $5,800. However, if this level fails to hold, then I expect a test of $4,200 next week.

If the price can sustain above $5,800, $7,200 is the key resistance level for Bitcoin to completely break out of this descending channel.

Mining difficulty decreases

We have had a significant increase in mining difficulty since the beginning of 2020. At the same time, the price has also kept rising. So this seems to be a valid indicator.

However, next week we will see the first double-digit adjustment in mining difficulty this year, with a -10.54% adjustment. Only time will tell if this will have a negative impact on the price of Bitcoin.

The yearly trend suggests this could be a correction after a big drop. Bitcoin history shows that there is always a round of market baptism before a big reward. The next chart may help you visualize what may happen in the coming weeks and months.

Similar to the S2F ratio, I think this chart can convey an important message, which is "continue to buy Bitcoin at current levels."

While this chart is not intended to provide financial advice, and like the S2F model is likely based on hindsight, it does show that we are likely to stay in the blue “sell” zone around the halving.

As a Bitcoin trader, I am very happy with the information I see in this chart. This means that there are more opportunities to buy in the current market. Maybe the price of Bitcoin will continue to fall next week, but investors should view it as an opportunity to buy, rather than thinking that the market value of their hands is falling.

Bullish scenario

I repeat my analysis from last week, the CME gap still exists at $9,165. Although it feels almost impossible now, 90% of CME gaps get filled, so it is always possible.

However, looking ahead more realistically, if Bitcoin can hold $5,800 as support, all eyes will be on $7,200 as a key level to break.

From here, I would expect the next level of resistance to be around $8,000 and then we could even start to think about $10,000 again.

Bearish scenario

We cannot ignore the turmoil in global markets right now. Therefore, if $5,800 fails to hold, I think it is very likely that BTC will retest $4,200.

The probability of a drop below $4,200 is not high. However, if it falls below this level, then $2,760 would be the last support level I would watch as this would represent an 80% retracement of last year’s high of $13,800. If it fails to rebound there, then Bitcoin could drop to sub-$1,000 levels.