Bitcoin miners are facing serious risk, and it doesn’t look good. The BTC hashrate has risen to all-time highs, leading some to believe that the crypto is on the brink of capitulation. CryptoQuant, the on-chain crypto analysis platform, warns that investors may also be in trouble if BTC drops below current prices.
The hashrate is problematic for two primary reasons. There isn’t enough revenue from transaction fees to cover costs– meaning Bitcoin miners need higher prices to remain profitable. Secondly, miners must sell their coins to pay for power consumption and other expenses if the demand for BTC falls or the number of Bitcoins.
With this kind of scenario playing out before us, what can we expect to see if such a thing were to happen? According to cryptoquant: “The market would undoubtedly react negatively after an event of that scale, but the effects of it might not be as bad as they seem at first glance.”
While this could be due to investors having faith in Bitcoin and its ability to survive even in these bearish times, the more likely reason is that miners cannot dump their mined coins on the exchanges before buyers flood them with offers. This will result in a massive supply being drained from the market and put into cold storage. Only when Bitcoin becomes much higher than where it is now will we see miners selling again — which may only happen during the next bull run.
What does technicals suggest about BTC?
The MACD line is trading below the red signal line on the 4-hour chart of BTC/USD. This is a sign of bearish momentum and could signal a downside break below $19,000 if the trend continues. That said, the RSI is also in overbought territory and could turn lower soon, which may bring some selling pressure back.
Source: Tradingview
The SMA crossover on the 4-hour chart is also signaling a bearish trend, and there is a chance that BTC could drop further in the near term. However, there are also many bullish signs that could mean a move back to $20,000. If we look at the 1-day chart of BTC/USD, we can see that multiple price action patterns have formed over the last few months. The good news for traders is that all those patterns have been broken to the upside, and BTC looks set for more gains in the medium term.
Conclusion
Despite the current bearish sentiment in the crypto market, Bitcoin miners face serious risks – significantly if BTC prices drop below $19,000. However, there is also plenty of evidence suggesting that Bitcoin could be headed for another bull run soon. Whether this happens in the short term or not remains to be seen, but it seems likely that we will see more gains as long as BTC continues to hold above $20,000.
