Bitcoin Price Consolidates As Miners Send Record Funds to Exchanges
Cryptoquant, an on-chain analytics firm reports a record amount of Bitcoin from miners are being sent to exchanges. This is an important indicator for traders to watch, because miners sending their newly minted Bitcoin to an exchange indicates a likely intent to cash out.
Miners are the group of people that secure the Bitcoin blockchain by supplying computing power to validate transactions. As a reward for securing the network, miners are rewarded with newly created Bitcoin each time they create a “block”. The current reward for each block is 6.25 Bitcoins, and a block is created every 10 minutes. This makes the total Bitcoin rewarded per day to miners approximately 900 Bitcoins – worth about 30 million USD at today’s current prices.
Cryptoquant uses blockchain analytics to monitor the flows of newly minted Bitcoin, and reported that as the price of Bitcoin rose to its all time high of 42k, more and more miners started sending their Bitcoin to the exchanges – likely to cash out.
Does this mean the price is going to drop? Not necessarily. There are two important factors to consider when analyzing this piece of data. First, Bitcoin has seen a huge surge in interest from both retail traders and institutional traders. Many of these investors are buying Bitcoin as a store of value, meaning they buy Bitcoin and hold onto it. Miners have spent the last 3 years running their equipment while Bitcoin hit prices as low as 3k. With Bitcoin prices currently near the all time high, it makes good sense to sell accumulated Bitcoin for these businesses.
The second factor to consider is the amount of Bitcoin held in reserves by exchanges. Data from Cryptoquant also shows that the amount of Bitcoin in reserves on exchanges is dropping, which is due to increased demand to buy Bitcoin. Max Keiser, the founder of the Keiser Report, warned this week of a possible supply crisis coming to Bitcoin. Keiser explained that in the near future, an institution will seek to buy a large amount of Bitcoin, and the amount available on the open market won’t be able to fulfill the order. This would result in the price of Bitcoin skyrocketing in a manner of just 10-minutes.
So far, increased demand for Bitcoin has resulted in investors buying up the influx of newly-minted coins from Bitcoin miners. Increased institutional and retail trading desire for Bitcoin doesn’t appear to be declining anytime soon. Overall, Bitcoin and cryptocurrencies have a very bright future.