On-chain data shows Bitcoin miners could be dumping right now, a sign that could hamper the rally.
The Bitcoin Miners position index has recently skyrocketed
As noted by an analyst in a CryptoQuant after, miners can currently exert selling pressure on the market. The relevant indicator here is the “Position index of miners(MPI), which measures the ratio of miner outflows to its 365-day moving average.
The “outflow of minersrefer to the total amount of Bitcoin that all these chain validators are currently withdrawing from their wallets. Usually miners extract coins from their reserves with the main purpose of selling them. A high value of the outflow may therefore indicate that this cohort is currently dumping large amounts.
Since the MPI compares these outflows to their annual average, the value of the metric can tell us how current miner sales compare to the average over the past 365 days.
When this indicator has a high value, it means miners are currently selling at a higher rate than usual, while the low value statistic could suggest that there is less selling pressure emanating from these chain validators than last year’s average.
Here is a chart showing the trend in the Bitcoin MPI over the past year and a half:
The value of the metric seems to have been quite high in recent days | Source: CryptoQuant
As can be seen in the chart above, the Bitcoin MPI has been rising recently and has reached a value of around 4, the highest level the indicator has seen since April last year. The statistic with such a large value would suggest that miners are pulling far more coins than usual from the market and therefore may be putting extraordinary selling pressure on the market right now.
The graph shows that peaks in the statistic are usually followed by falls in the price of the cryptocurrency. The most extreme example was in April 2022, when the price saw a very sharp drop not long after the metric registered even higher values than today.
The last time the indicator saw high readings was back during the collapse of the crypto exchange FTX when the price saw another rapid downward move.
Bitcoin has been busy with rallies over the past week, reaching $21,000 so far, so these increased withdrawals right now could indicate that miners want to take advantage of this opportunity to make a profit while they still can, and ditch their coins.
If this cohort does indeed intend to sell with these transfers, then the crypto rally could potentially encounter some impedance and temporarily halt here, if not completely reverse direction.
BTC price
At the time of writing, Bitcoin is trading around $20,800, up 20% over the past week.
The value of the asset seems to be finding it hard to make a significant break above $21,000 | Source: BTCUSD on TradingView
Featured image of Kanchanara on Unsplash.com, charts from TradingView.com, CryptoQuant.com