The amount of Bitcoin held by cryptocurrency miners on over-the-counter (OTC) desks has surged to its highest level in over two years, raising concerns about a potential downturn in Bitcoin’s price.
Historically, significant increases in Bitcoin miner OTC balances have often been followed by sharp declines in the cryptocurrency's value. Previous instances of high OTC balances have led to Bitcoin price drops of up to 63% within just a few months.
“Historically, increases in Bitcoin OTC desk balances have been associated with declines in Bitcoin prices.”
Stated a report from CryptoQuant on August 21.
Rising OTC Desk Balances Could Indicate Major Selling
Over the past three months, Bitcoin OTC desk balances for miners have soared by 70%, reaching levels not seen since June 2022. The current balance stands at 368,000 Bitcoin, approximately valued at $22.36 billion.
“The substantial rise in OTC desk balances suggests significant selling activity among miners.”
CryptoQuant added.
The last time Bitcoin OTC desk balances were this high, significant price drops followed. For instance, in May 2018, after OTC balances exceeded 400,000 BTC, Bitcoin’s price plunged by 63% from $8,475 to $3,183 within seven months. A similar pattern occurred in November 2021, when Bitcoin’s price dropped 45% from around $64,000 to $35,058 after miner OTC balances peaked near 500,000 BTC.
Miners typically choose OTC deals to sell Bitcoin to achieve “better execution” without significantly impacting the market price due to the higher liquidity available in OTC markets, according to CryptoQuant.
However, some market dynamics could counterbalance this selling pressure. A recent decline in Bitcoin supply on crypto exchanges, combined with Bitcoin whales accumulating 94,700 coins over the past six weeks, might provide support to Bitcoin’s price.
Miners Face Challenges Post-Halving
This development comes as miners continue to struggle with rising operational costs and reduced rewards following the April Bitcoin halving. Data from MacroMicro and CoinMarketCap indicate that the average cost to mine a Bitcoin is $72,224, significantly higher than the current Bitcoin price of $60,797.
“Every miner earned less in Q2 than Q1, but some were better at shoring up the revenue reduction than others by expanding their hashrate over the quarter.”
Noted Bitcoin commentator Colin Harper in an August 22 post on X.
Despite upgrading their equipment, major crypto mining firms saw a decline in revenue in Q2 2024 compared to Q1, according to Harper.
In a potential shift in strategy, VanEck suggested on August 18 that Bitcoin miners could generate an additional $13.9 billion in yearly revenue by 2027 if they partially transition to providing energy to the artificial intelligence and high-performance computing (HPC) sectors.
“AI companies need energy, and Bitcoin miners have it.”
VanEck stated.
