Cryptocurrency miners were under extreme pressure due to the meltdown of the crypto market and the difficult nature of Bitcoin mining, and they were left with no choice but to liquidate their holdings and sell 100% of all issued BTC in order to make up for their extraordinarily high losses.
It is evident from the aforementioned reasons that the sector is still experiencing “immense financial hardship,” according to Glassnode. According to their research, miners are sharing about 135% of the coins that they have created.
Any value above 100% is an indication that miners are now sharing more than they are issuing.
The data indicates that Bitcoin miners are tapping into their HODL wallets/reserves. They are attempting to offset rising electricity costs, which are essentially driving down the profitability of mining operations, by selling their reserves.
It is evident that the industry is experiencing a severe crisis— indicated by the tapping of reserves by miners to breakeven. More mining sector liquidations can happen if the bear market worsens and continues for a few more months, which will further degrade Bitcoin’s price and the mood of the market as a whole.
Since mining difficulty is inversely correlated with network hashrate today, Bitcoin mining is essentially a game of survival of the fittest. The difficulty will fall as more miners go under, which will cause the market to be afloat. In simpler words, as Bitcoin mining becomes less profitable, miners will start dropping out of the business.
The graph below demonstrates how the difficulty of mining Bitcoin has grown to a new all-time high— a result of the most recent change in price which went up to 20,000 levels and dropped back to levels below 16,000.
The last time the cost of mining Bitcoin even reached the price at that time was in 2018, which triggered a months-long miner strike. Therefore, if the difficulty of mining increases but the prices remain constant, a similar surrender may be anticipated.
The BTC network experienced the largest reduction in mining difficulty in its history China announced a crackdown on cryptocurrencies and mining. This development eventually served as the cornestone for the huge bull run that drove BTC to the $69,000 price level.
The halving, which divides the block rewards in half every four years and makes up a significant amount of the block rewards, is another factor that affects how much money the miners make in addition to the BTC prices. During a bull market, the hash price deviates from the current trend and briefly rises.