The Bitcoin mining activity keeps growing despite current prices, and new data show that a massive crisis in the sector is unlikely. A Twitter user recently said that the value of Bitcoin is around 20% above the production cost for miners.
Although the Bitcoin price has fallen by USD 27,000 below its all-time high, miners find it more attractive than ever. The hash rate, an estimate of the total processing power used for mining, reached new record levels.
Those concerned that a further drop in the Bitcoin price could pressure miners to sell their coins. However, they received new data covering how much BTC/USD they should trade for breaking even.
Using the Bitcoin production cost indicator of Charles Edwards as a reference, Twitter user Venturefounder revealed the current price break-even point is USD 34,000. He added that the capitulation of miners in December 2018 and March 2020 caused the worst crises of BTC.
When the value of Bitcoin reached USD 30,000 in May, there was a risk of miner capitulation. Edwards, the CEO of asset manager Capriole, said that the current production cost is USD 34,000, 20% below the current price.
However, miners do not have to sell their BTC, thanks to the current profitability and prospects of the cryptocurrency market. In 2019, Edwards noted that transaction fees give them an additional cushion against spot price incursions below the production cost.
The Current Accumulation by Bitcoin Miners Does Not Signal a Sell-Off
New data shows that Bitcoin miners are accumulating more coins than ever before in the last five months. That could signal current prices will not lead to a sell-off.
Likewise, Twitter account Bitcoin Archive stated that the accumulation by miners is massive. Besides, Glassnode shows that the trend has accelerated since the price hit the high of USD 69,000.
The overall market balance looks healthy and shows that current fears about future economic difficulties are insignificant in the mining sector. In that regard, renowned analysts predict a Bitcoin price of no less than USD 30,000 in the worst case.
Many Bitcoin Miners Seek to Flee from Kazakhstan
After Kazakhstan became the country with the second-highest Bitcoin hash rate in 2021, it is now inconvenient for mining. According to Reuters, many leading mining operators could be considering leaving the Asian country.
The report notes that Bitcoin mining farms are afraid of the political instability and threat of stricter regulations in Kazakhstan. For that reason, they are considering transferring part of their operations to destinations like the US and Russia to avoid going bankrupt.
In early January, massive protests in Kazakhstan forced the government to take extreme measures. They cut the energy supply and the Internet service, which kept mining nodes disconnected from the network. That situation caused an abrupt drop of 12% in Bitcoin computing power.
There are reports about the solution to the situation in Kazakhstan and the withdrawal of the Russian peacekeeping troops. However, Bitcoin miners believe that the development and stability of the mining industry are still at risk in the country.
By Alexander Salazar
