- CryptoQuant analyst Mignolet claimed that one of the biggest challenges Bitcoin
miners face is cost pressure.
- The latest MPI rise (shown by the blue square) highlighted the growing pressure on miners. However, it is not yet close to the red line where the market is considered to be overheated.
- Bitcoin miner reserves are still remarkably high compared to June’s lows when they hit yearly lows. There is still the possibility that miners will be forced to sell if selling pressure continues.
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Bitcoin miners may be selling their BTC to cover rising costs; However, greater selling pressure may put miners in a more difficult position.
Bitcoin miners dealing with rising costs
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The state of Bitcoin mining often reflects how the network is functioning and the level of market activity at any given time. Therefore, examining how Bitcoin miners are faring can provide insights into the health of the network.
CryptoQuant analyst Mignolet claims that one of the biggest challenges Bitcoin miners face is cost pressure, based on an analysis of the Bitcoin Miner Position Index (MPI). This metric is used to indicate how much pressure miners are under in terms of cost pressure.
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The recent rise in the MPI, as indicated by the blue square, highlighted increased pressure on miners. However, it is not yet close to the red line, which is considered an overheated market. In this zone, miners feel pressure to sell their coins to cover operating costs.
Current market conditions still support miner profitability
Interestingly, the MPI has cooled off more recently. This coincided with an increase in miner revenue over the last ten days.
The increase in miner revenue reflected recent activity. Bitcoin’s price movement may decline, but there is still a lot of activity. Despite the above observation, pressure faced by miners was still evident in some metrics.
One of the best examples is the Bitcoin miner reserve metric, which saw some negativity since the last week of August. It is also worth noting that miner reserve outflows stabilized at the beginning of September.
It’s important to note that Bitcoin miner reserves are still significantly higher compared to their lowest levels in June when they reached their lowest point. If selling pressure continues, there is still a possibility that miners will be forced to sell.
This is because miners are typically encouraged to HODL when they have bullish expectations. Another crash would put the market in a FUD situation, hindering participation. The potential result would be lower transactions for lower income. An assessment of Bitcoin miner flows showed that both inflows and outflows, and monthly lows of inflows, have returned.
Low Bitcoin miner flows can be explained by the current uncertainty. Miner revenues have also slowed, leading to low miner inflows. On the other hand, miners are still optimistic because they expect higher prices in the future, especially after the recent drop in Bitcoin’s price.