According to data from CryptoQuant, miners look like large amounts of Bitcoin (BTC). Historically, increased sales pressure from miners marked a local peak and led to sharp, long-lasting corrections.
Why do Bitcoin miners sell?
In May 2020, on-chain analyst Willy Woo said there would be two sources of unparalleled selling pressure in the market after the block reward halved.
Woo pointed to Bitcoin miners and cryptocurrency exchanges who sold the fees they earn in the form of crypto assets as the sources of selling pressure. He said:
“There are only two unparalleled selling pressures on the market. (1) Miners diluting the supply and selling it in the market, this is the hidden tax through monetary inflation. And (2) the exchanges that tax the traders and sell in the market. “
Therefore, miners could continue to serve as a major source of selling pressure on Bitcoin in the short to medium term.
Based on data from CryptoQuant, the Miner Position Index (MPI) has risen significantly in recent days.
On January 10, the MPI hit a level similar to July 2019, when the BTC price fell quickly below $ 14,000. Ki Young Ju, the CEO of CryptoQuant, said:
“Miner Position Index seems enough to make a local top. They are selling $ BTC. I am going to place a small short to scalpe $ BTC in this bearish market in the short term. They have been selling $ BTC since December last year, but the correction was small due to institutional purchasing power. “
Ki later noted that he closed the scalp short and emphasized that the correction was short-lived.
It is possible that demand from US buyers is overwhelming the sales pressure from miners. This theory is supported by the recent trend of Bitcoin price trading at a higher premium with Coinbase than with other major exchanges such as Binance.
What do traders expect in the short term?
Some traders expect Bitcoin to see a bigger drop in the near term. Edward Morra, a cryptocurrency trader, said one possible scenario is a slow correction to around $ 36,000.
Morra noted that the scenario of Bitcoin falling all the way down to $ 36,000 is unlikely, but it would be a “typical bull market thing.” He wrote:
“I think an unlikely scenario, but I see some resemblance to last week’s transition from Sunday to Monday. By the way, this is very bullish to set low of the week on Monday and then expand, typical bull market thing. “
Philip Swift, the creator of LookIntoBitcoin, said that while Bitcoin is unlikely to see a 30% decline, the appreciation may decline. This could lead to slower momentum for BTC, especially as it retests the USD 42,000 resistance level in the near future. He explained:
“One point to clarify, because there seems to be a misinterpretation. I don’t think $ BTC is on the verge of crashing + 30%, I thought / think the price increase could slow down in the near term. “