Hashrate Index’s Jaran Mellerud recently released an “extensive analysis” that a capitulation of Bitcoin miners could put massive selling pressure on the market and trigger a crash. The topic has been a recurring part of the discussion in recent weeks over whether the BTC bear market could be extended by the tight mining industry.
Charles Edwards of Capriole Investments stated two weeks ago that miners are capitulating started, as indicated by pound sign ribbons. Investment giant VanEck also recently published an analysis that the bear market could continue into the second quarter of 2023 due to miner capitulation. The company predicted that BTC could hit a low of $10,000 to $12,000 in the first quarter of 2023.
Mellerud refutes this assumption by saying that the miners’ total BTC holdings are not significant enough to move the spot market.
Are Bitcoin Miners Not As Powerful As Thought?
The Hashrate Index Analyst writes that all miners must collectively own a significant portion of the circulating supply to have a meaningful impact. However, the question of the number of their holdings is a great mystery, although estimates exist.
On-chain data providers such as CoinMetrics and Glassnode provide the best-known estimates by grouping wallet addresses based on their proximity to the Coinbase transaction. Mellerud claims these numbers likely significantly overstate miners’ Bitcoin holdings. CoinMetrics estimates 820,000 BTC for all miners worldwide.
Another possibility is to derive the number from public miners’ Bitcoin holdings. Using these numbers, Mellerud estimates 470,000 Bitcoin.
So, with 19.2 million BTC currently in circulation, miners only hold between 2% and 4%. “The public image of miners as huge bitcoin holders and influential market participants might have been correct a decade ago […]. Times have changed and miners no longer hold a significant portion of the Bitcoin supply,” Mellerud claims.
BTC Holdings by Miners Vs. Spot volume
However, in terms of potential selling pressure, it is also important to know the size of the spot market to figure out how well the market can handle the selling pressure. According to Mellerud, the best way to estimate the absolute selling pressure of miners is to see how much BTC they receive each day.
Generally, about 900 freshly minted Bitcoins flow into miners’ wallets every day. When miners sell less than 100% of their production, they collect Bitcoin; when they sell more than 100%, they reduce their holdings.
The chart below shows that Bitcoin sales by miners peaked in June when they sold 350% of their production. For the rest of the year, the rate was a maximum of 150%.
Using Binance spot volume, Mellerud shows in the chart below that a selling pressure of 100% of production accounts for only 0.2% of spot volume. At 200% it represents only 0.4% and at 300% it is still only 0.6% of the total volume. Mellerud concludes:
Due to the small share of Bitcoin miners’ hypothetical volume compared to Bitcoin’s total spot volume, we see that Bitcoin should have more than enough liquidity in its spot market to meet miner selling pressure.
In a worst-case scenario from Mellerud, where all miners dump their entire holdings within 30 days (evenly distributed across all days), the selling pressure of 470,000 BTC (4,900 BTC per day) would amount to only 1% of the total spot. volume.
Only if the holdings actually amount to 820,000 BTC and all of them are liquidated within 30 days can it lead to a Bitcoin price crash, says Mellerud. Miners would then account for almost 7% of the spot volume.
The price of Bitcoin is currently down about 3.5% in the past few hours. At the time of writing, BTC was trading at USD 17,035.