Bitcoin Miner OTC Balances Reach 2-Year High — A Bearish Signal for Bitcoin?
The amount of Bitcoin that cryptocurrency miners have on hand to sell has reached its highest level in over two years. This is known as Bitcoin miner OTC (Over-The-Counter) balances, and when these balances rise, it can signal that miners are getting ready to sell a lot of Bitcoin. History has shown that this usually leads to a drop in Bitcoin’s price in the near future.
According to a report from CryptoQuant, there have been several times in the past when high Bitcoin miner OTC balances were followed by significant price drops. For example, in May 2018, when Bitcoin OTC desk balances spiked above 400,000 BTC, the price of Bitcoin was $8,475. However, by December 2018, the price had fallen by 63% to just $3,183. A similar situation happened in November 2021, when Bitcoin’s price was around $64,000, and miner OTC balances were at an all-time high near 500,000 BTC. In just two months, by January 2022, the price had dropped by 45% to $35,058.
What Are OTC Desk Balances?
OTC desks are places where large Bitcoin transactions happen off the regular cryptocurrency exchanges. Miners often use these OTC desks to sell their Bitcoin because they can get better execution on their trades and avoid affecting the price of Bitcoin as much as they would if they sold on a public exchange. The higher liquidity in the OTC market allows for smoother transactions without causing big price swings.
Currently, Bitcoin OTC desk balances for miners have reached a level not seen since June 2022. Over the past three months, these balances have surged by 70%, reaching 368,000 Bitcoin, which is roughly $22.36 billion. The substantial rise in OTC desk balances suggests that miners are gearing up for significant selling activity. This can be a bearish signal for Bitcoin’s price.
Historical Impact of Rising OTC Balances
Historically, increases in Bitcoin OTC desk balances have been linked to declines in Bitcoin prices. When miners hold more Bitcoin in OTC desks, it usually means they are preparing to sell large amounts. This selling pressure can cause Bitcoin’s price to drop.
For example, as mentioned earlier, the price of Bitcoin dropped by 63% in 2018 and by 45% in 2021 after miner OTC balances reached high levels. These examples show how rising OTC desk balances can negatively impact the market.
Miners’ Financial Struggles
One reason why miners may be selling more Bitcoin is that they are facing financial difficulties. The cost to mine a Bitcoin has risen significantly, especially after the recent Bitcoin halving in April. The halving reduced the rewards that miners receive for mining Bitcoin, while at the same time, operational costs have gone up.
According to data from MacroMicro and CoinMarketCap, the average cost to mine one Bitcoin is now $72,224, while Bitcoin’s current price is around $60,797. This means that many miners are operating at a loss. To cover their expenses, they may need to sell more Bitcoin, which could explain the rising OTC desk balances.
The Role of Bitcoin Whales
Despite the bearish signal from rising OTC balances, there is some hope that Bitcoin’s price may not drop as much as it has in the past. One reason for this is that Bitcoin whales, or individuals and institutions that hold large amounts of Bitcoin, have been accumulating more Bitcoin recently. Over the past six weeks, Bitcoin whales have added 94,700 coins to their holdings.
This accumulation by whales could help balance out the selling pressure from miners. If whales continue to buy Bitcoin, it could provide support for the price and prevent a major decline.
Future Prospects for Bitcoin Miners
While the current situation may seem challenging for Bitcoin miners, there could be opportunities for them in the future. For example, VanEck, a financial firm, suggested that Bitcoin miners could potentially generate around $13.9 billion in additional yearly revenue if they partially transition to providing energy to the artificial intelligence (AI) and high-performance computing (HPC) sector by 2027.
AI companies need a lot of energy to power their operations, and Bitcoin miners have access to large amounts of energy. By partnering with AI companies, Bitcoin miners could find new ways to make money and reduce their reliance on Bitcoin mining alone.
Bitcoin Market Trends
In addition to the impact of miner selling and whale accumulation, other factors are also influencing Bitcoin’s price. One of these factors is the declining supply of Bitcoin on crypto exchanges. When there is less Bitcoin available on exchanges, it can create upward pressure on the price, as there is less supply to meet demand.
However, the selling activity from miners could offset this effect. If miners continue to sell large amounts of Bitcoin through OTC desks, it could put downward pressure on the price, even if the supply on exchanges is low.
The rising amount of Bitcoin OTC desk balances for miners is a bearish signal for Bitcoin. History has shown that when miners prepare to sell large amounts of Bitcoin, the price tends to drop. This, combined with the financial struggles that many miners are currently facing, suggests that we could see a decline in Bitcoin’s price in the near future.
However, the situation is not all doom and gloom. Bitcoin whales have been accumulating more coins, which could help support the price. Additionally, Bitcoin miners may find new opportunities to generate revenue by partnering with AI companies in the future.
Overall, while the rising OTC desk balances are a cause for concern, other factors could help mitigate the impact on Bitcoin’s price. Investors should keep a close eye on these trends to better understand where the market is headed.
