One of the most stable trends in the last few years has been the constant selling pressure from BTC miners, who are being forced to sell new BTC to cover costs. This selling pressure still exists today, but has dropped significantly in recent months as miners begin to hold more BTC.
Profitability of mining is currently the highest in 2.5 years, and miners also have better access than ever to traditional markets. The market cycle also looks ready for a new wave of growth, which motivates miners to keep as many BTCs as possible in anticipation of higher prices.
The graph below shows the volume of BTC transfers from miners smoothed by a 30-day moving average. Before the rally to previous highs, the volume of transfers from miners to exchange wallets was the highest in the last two years. Miners are now sending 65% less BTC to the exchange than during the previous market peak.
The 90-day average shows the same trend and highlights the decline in the volume of transfers over the last six months.
Another way to look at this trend is to normalize the volume of transfers from miners to exchanges according to the number of newly generated BTC. This is better for comparing volumes between different halving cycles with different block rewards. Using the ratio of the 90-day average volume of transfers from miners to the 90-day average volume of supply of new BTC, the peak of the previous historical maximum coincides with when the miners sold the highest percentage of newly generated BTC. Today, this percentage has fallen to two-year lows and continues to decline as the volume of transfers from miners to exchanges declines.
Shares of publicly traded miners continue to perform well
Shares of publicly traded miners have been rising in recent days, with five-day stock returns of most leading mining companies exceeding 20% at the time of writing, compared to 7% for BTC and 1.1% for S&P. Index 500. YTD: Marathon Digital Holdings, Hut 8 Mining, Bitfarms and Hive Technologies all outperform Bitcoin by 118% and trade well above the market benchmark of 23.30%.
Short-term earnings growth comes just before many of these miners announce their October numbers in the next few days.
A comparison of last year’s figures shows that the shares of mining companies are strongly correlated with BTC’s exchange rate and with each other. Many strong correlations have persisted over the last six months, with miners’ shares generally hovering in line with BTC’s performance.
Distribution of rewards
There has been no significant increase in transaction fees on the BTC network so far, and in the last two weeks their share in the total remuneration for the block is only 1.4%. While the low fees can certainly be attributed to the rapid growth of the Lightning Network, the growing adoption of SegWit and the generally friendlier market, it also suggests that the bull market real estate mania phase has not yet begun.
It is also important to note that although the percentage of fees on miners’ income remains roughly the same as in 2017, looking at the numbers in BTC, the picture looks completely different. Why? The protocol has a built-in halving function, which gradually reduces the rewards per block to zero, which will be achieved in the next 120 years. So it is likely that, from the point of view of BTC, the earnings of the miners will fall significantly in the long run.