Bitcoin has just seen its biggest miner sell-off in a year this past 48 hours. As the Bitcoin halving occurred last month, miners were suddenly being paid half of what they were used to overnight. As a result many of the smaller or older mining rigs became unprofitable to operate. This is what causes such miners to sell their accumulation of Bitcoin payments in order to cash out for necessities, like living expenses or to pay for the mining business. This is called “miner capitulation” and it is a normal part of the cycle as seen in Bitcoin over the past 11 years of its existence.
Graph shows miner selloffs and subsequent price spikes, from Glassnode
In fact it has only happened twice before just after the two previous halvings in miner fees. So this is going according to clockwork or according to the code, as written by Satoshi Nakamoto in 2008 at the very start. Bitcoin was designed this way, in order to sustain itself in the long run. So this week we saw the next step play out, and miners had to sell en masse. In fact in the past two days, 2650 Bitcoin were transferred to exchanges, the biggest move since March 2019, over a year ago. Price immediately had a substantial drop of 3%, but is recovering as I write this.
The good news is that the last time this occurred, we saw a follow up in price of a massive amount, so although it looks like a short term dump in the Bitcoin price, we are in for a major bullish uptrend in the coming weeks and months. Price is still set to smash the old ATH of $20000 and climb up toward $100 000 in the next 24 months at this rate. The past has shown just how powerful the price spike is after the halving, so predictions are based on past history, as well as math.
The mining of Bitcoin is the center of the storm of activity overall, and mining profitability may be half what it was earlier this year, but demand will continue to grow and thus price will keep climbing. Old miners will indeed sell, and may even shut down due to lack of profit, but new miners will take up the slack, like the massive mining farm being built in Texas. This will possibly be the biggest mining farm outside of China, who themselves control over 50% of all mining globally. This is not too decentralized and could do with more diversified mining by country. Iran also has an improving share in the mining but it only amounts to a few percent in total, single digits perhaps. So we need some competition for China, lest their CCP dictatorship government nationalize them all and take over the Bitcoin platform in a 51% attack.
Ultimately this week’s price drop is nothing unusual, and I am watching to see if there is any more downside, perhaps a final drop in price, at which point I will be investing in still more sats, as I believe this is the last of the sub-$10k Bitcoin. If I can buy the next dip, I will be happy. It is part of my strategy to keep accumulating Bitcoin a little at a time, in a strategy called “dollar cost averaging” where I buy the dip regularly, all the while averaging out my overall buy-in price for Bitcoin. As long as it is below $14 000 I will keep buying. That is the last local high that we have seen in price before the ATH of $20k. Technical Analysts and investors are predicting a new ATH by the end of this year, which makes sense to me. Thereafter in 2021 we are set to see another massive spike in price, just like we saw in 2017, four years before. So now is the time to buy Bitcoin for the next uptrend. I hope you are on board because this rocket is about to go to the moon, and I already have my seat, how about you?