Bitcoin price trades around $65,000 as selling pressure mounts for the largest cryptocurrency, which has altcoins nuking hard. For altcoins to stop crashing, BTC needs to hold strong.
While $65k-$66k seems the sweet spot for the largest cryptocurrency by market cap, a drop to $60k can be expected in the near future. Even a deeper flush to $50K isn’t out of the picture for Bitcoin, which would only spell trouble for altcoins.
This lack of enthusiasm and excitement in the market isn’t out of the ordinary. A correction should be expected after prices rallied to new all-time highs (ATHs) a few months ago. Also, summer tends to see a lull in activity; hence, the adage ‘sell in May and go away.’ This seasonally weaker historical performance tends to go on until October.
As noted by Kaiako research, “Both crypto and traditional financial markets are experiencing the typical summer trading lull. Historically, Q3 has had the lowest volume by a significant margin, with cumulative BTC trade volume over 40% below the highest-volume quarter.”
So, for now, Bitcoin should be expected to stagnate and experience muted volatility. The crypto asset is also gaining maturity with the launch of Spot Bitcoin ETF and BlackRock’s IBIT overtaking crypto-native Grayscale to become the world’s largest Bitcoin ETF.
Another reason for the ongoing weakness in the market could be attributed to Bitcoin miners offloading their BTC holdings due to a decline in revenue after the halving event.
Miners Behind Bitcoin Selling Pressure?
The fourth halving, which occurred on April 19, slashed Bitcoin miner rewards from 6.25 BTC to 3.125 BTC per mined block.
Besides the rewards getting halved, miner revenues are negatively affected by the declining transaction fees. As of writing, Bitcoin’s average transaction fees have been 0.000063 BTC ($4.11) or 24.4 sats/vB, as per Bitinfocharts. Right before and right after the halving, the fees rallied to their almost $128 peak, but since then, they have been going down and keeping below $5. There was a small burst to $83.7 on June 7, but fees are back to previous low levels.
With that, Bitcoin mining profitability is now down at 0.0498 USD/Day for 1 THash/s. In the second half of 2023, profitability remained between $0.05 and $0.08, only to increase in anticipation of the halving, surging to $0.175 on the very next day. But mining profitability is now making new lows.
So, it makes sense that with network hashrate at 630.4 Ehash/s keeping around the ATH at 732.289 Th/s hit on May 24 while revenues have fallen substantially, miners are choosing to sell their BTC to fund their daily operations.
Earlier this month, Marathon Digital, the largest U.S.-listed bitcoin miner, reported selling more than 60% of all the BTC it mined since halving. While Riot Platforms didn’t sell any, CleanSpark sold 2.43 BTC.
However, with BTC mining cost coming in at $83,000, it is expected that the price of bitcoin may not remain under this level for a long time. Data provider CryptoQuant believes sustained low revenues and high hashrate may imply a potential market bottom.
JPMorgan analysts also noted that the hashprice, which measures just how much a Bitcoin miner can expect to earn from a particular quantity of hashrate, is currently 15% below the lows seen during the bear market bottom in December 2022. This, the analysts said, is “unsustainable,” and as such, they “expect hashprice to increase in the coming weeks as the network hashrate declines.”
A Shift in the Mining Sector & Price Action
Amidst all this, the market cap of 14 US-listed bitcoin miners reached a record $22.8bln after they rallied in the first half of this month, as per JPMorgan analysts.
Core Scientific led the pack with 117% gains. The miner recently rejected a $1.6 bln buying offer from AI cloud provider CoreWeave, with which it had a 12-year, $3.5 billion partnership to host CoreWeave’s AI-related services. Many in the Bitcoin mining world, such as IREN and Hut 8, have been pursuing AI to diversify their businesses. Core Scientific was followed by TeraWulf and IREN, which jumped 80% and 70%, respectively. Argo Blockchain was the only one that fell during this time.
This growth, as per analysts, could be due to U.S. Bitcoin miners seeing an increased share of network hashrate at 23.8%, up from 21% in April. This could also be taken as a sign that inefficient miners have scaled back their operations.
“The dwindling revenue in the mining sector means we’ll see an M&A spree in the sector as miners work to expand their operations and improve their efficiency to remain competitive. Here, US-based miners may come out as winners and see their share of network hashrate increase even further as the world’s most powerful man signals his support,” said Ape Terminal founder Hatu Sheikh.
Recently, US 2024 Presidential candidate Donald Trump hosted Bitcoin mining firms and promised to be friendly towards the sector. He wants all future BTC to be mined in the US.
However, Hatu Sheikh noted that, for now, the market is losing momentum. “Multiple factors like leverage, lack of a catalyst, miners selling, and the current times being not good historically don’t paint a bullish picture for Bitcoin, and the sideways action should prevail for now. Even more downturns should be expected.”
