The 2020 Bitcoin halving that took place on 11 May resulted to huge selloffs according to new data metrics. Glassnode’s Miner Outflow Multiple (MOM) indicates that the outflows from mining pools are nearing all-time lows when compared to their one-year moving average.
Glassnode’s MOM calculates coins leaving mining pools then compare them to yearly moving average as a ratio. According to this calculation, this ratio was 0.534 as on June 3, which is less than half its value on May 10, a day before the halving. December 2018 recorded mass mayhem after BTC/USD hit $3100. Due to this commotion, the ratio was recorded at around 0.28.
Tuur Demeester who is the founder of Adamant Capital reacted to the Glassnode reading via a tweet which argued that healthy BTC miners are hodling while the struggling miners have little BTC to sell, hence, there is reason to be optimistic for a bullish market.
The Bitcoin halving, though highly anticipated has effects on mining fees and the profitability of mining the cryptocurrency. Small miners without the huge capacity to process huge amount of transactions are likely to earn less than they did, affecting the amount of BTC they earn in a month. Because of this, the profitability that has been attached to being a minor on the Bitcoin platform is affected. Miners can therefore struggle, and opt to sell off some BTC.
The unprofitability of mining BTC can result in miners leaving for other crytpocurrencies such as Bitcoin Cash. These cryptocurrencies promise some stability in mining returns hence can attract those miners selling their BTC to stay afloat. If this happens and many miners leave the Bitcoin blockchain, the effect can be an increase in block time, affecting the transaction time and transaction fees that users pay.
On the other hand, some miners will highly benefit from this halving if their peers leave to mine other cryptocurrencies. This means that the number of miners competing to process transactions decrease, hence those left have more transactions to process. In case of a price surge, this can be highly profitable to remaining miners, as speculators will increase on the platform, increasing the number of transactions.
Miners on the Bitcoin platform have however currently been affected by the halving, as the price has not increased as analysts and speculators had indicated. Therefore, fewer transactions than those anticipated are on the network, affecting minor fees and rewards. This can explain the MOM ratio, and reason for struggling minors to sell their BTC.
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