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On-chain information indicates that Bitcoin miners are presently quite undercompensated. Could this instigate a selloff from these chain validators?
Bitcoin Miners Are Deeply Undercompensated According To This Model
As highlighted by analyst IT Tech in a CryptoQuant Quicktake article, the Miner Profit/Loss Sustainability has recently experienced a significant negative downturn for Bitcoin. The “Miner Profit/Loss Sustainability” denotes an on-chain metric that juxtaposes miner earnings with mining difficulty.
When the metric’s value is substantially positive, it indicates that miners are generating significant income in relation to the mining difficulty imposed by the blockchain for generating new blocks. Such a pattern may suggest that these chain validators could be overcompensated.
Conversely, the indicator being firmly in the negative territory can imply that miners might be undercompensated as they are receiving low revenue amidst high difficulty.
Here, we present the chart provided by the analyst that illustrates the trend in the Bitcoin Miner Profit/Loss Sustainability over the preceding year:
The metric's value appears to have registered a sharp negative downturn in recent days | Source: CryptoQuant
As illustrated in the preceding graph, the Bitcoin Miner Profit/Loss Sustainability has plunged deeply into the negative area, indicating a decrease in miner revenue relative to the difficulty.
The indicator is currently signaling an ‘extremely undercompensated’ status for the miners. Historically, whenever miners face financial pressures, they tend to sell off some holdings to cover electricity costs. Given the present condition of this group, it’s conceivable that BTC might soon experience heightened selling pressure from them.
So far, miner selling has actually shown a downward trend, as another metric indicates.
It seems that the metric's value has been trending downwards | Source: CryptoQuant
The chart presents the log-scaled data of Bitcoin Miner Selling Power, an indicator that assesses the ratio between BTC miner outflows (the amount exiting their wallets) against their overall holdings.
It appears that the metric has seen a sharp decline recently, possibly indicating that miners have been engaging in less selling relative to their reserves. Considering the pressures these chain validators are facing, however, it remains to be seen how much longer this balance can sustain.
In other updates, the total computing power utilized by the miners, known as the “Hashrate,” has plummeted, as evidenced by the 7-day average data of the metric.
The trend in the BTC Hashrate over the last year | Source: Blockchain.com
Earlier this month, the Bitcoin Hashrate soared to a new all-time high (ATH), but has since dropped dramatically, indicating that miners have struggled to maintain their upgrades, further reinforcing the pressures on them.
BTC Price
Bitcoin fell close to the $98,000 level yesterday, but its price has since rebounded to $101,100.
The value of the coin seems to have decreased significantly | Source: BTCUSDT on TradingView
Featured image from Dall-E, Blockchain.com, CryptoQuant.com, chart from TradingView.com
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