On-chain data from Glassnode shows Bitcoin miners are holding a record 1.82 million BTC, equivalent to around $20 billion. The data could be a fundamental catalyst for BTC or could be seen as a negative factor in the short term.
Catalyst or a Source of Selling Pressure? Time Will Tell
Citing Glassnode’s data, the cryptocurrency market data provider CryptoCompare said the Bitcoin holdings of miners hit a two-year high. The researchers at CryptoCompare said:
“Bitcoin miners are now holding more bitcoins than at any other point in the last two years, as the flagship cryptocurrency continues to trade above $11,000.”
There are two ways to analyze the data. It could be a positive catalyst because it shows miners are aggressively saving the BTC that they mine. But, it also could mean that miners currently have large amounts of Bitcoin, which could become a source of selling pressure.
In May, on-chain market analyst Willy Woo explained that there are two unmatched sources of selling pressure in the Bitcoin market. He said:
“There’s only two unmatched sell pressures on the market. (1) Miners who dilute the supply and sell onto the market, this is the hidden tax via monetary inflation. And (2) the exchanges who tax the traders and sell onto the market.”
If miners hold larger amounts of Bitcoin than usual, and they begin to sell over time, it could apply selling pressure on the entire cryptocurrency market.
Miners selling off Bitcoin is different from traders selling or purchasing Bitcoin. It imposes additional pressure on the market. Woo noted:
“This is very different from traders buying or selling. When we say traders are ‘buying’ or ‘selling’ this is a myth. Every trade is matched, every trade has a buyer and a seller. (When we say the market is buying or selling, we actually mean smart money is buying or selling.)”
Whether the two-year high holdings of miners would cause the Bitcoin market to build a stronger fundamental for an extended rally or lead to a pullback remains uncertain.
Coincidentally, shortly after the miner holdings of Bitcoin reached a local peak in 2018, BTC saw a deep correction to sub-$4,000.
It is possible that miners are holding onto more Bitcoin than usual simply because other miners and mining pools are doing so.
Data shows that relatively small mining pools are holding upwards of $100 million in Bitcoin. CryptoCompare wrote:
“A third motive for miners accumulating more BTC are mining pools accumulating uncharacteristically large amounts of bitcoin.”
Until the Bitcoin market sees a big reaction from sellers, in the medium term at least, the accumulation of BTC by miners is generally positive.