Is Bitcoin Down Because of Ordinals, BRC-20 Tokens, and Miners?

Bitcoin’s recent decline may be due to miners reducing their reserves, but one analyst believes they may soon change their strategy. Although Bitcoin saw a slight recovery over the weekend, it remains subdued with a seasonal low of $27,360. So what factors are influencing this recent slump?

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Crypto market analysis firm CryptoQuant suggests that the downward price pressure may be coming from miners

In a BaroVirtual post on Saturday, the analyst pointed out that miners have significantly reduced their holdings since May 5th, with the change in miners’ net position turning negative on May 9. This metric measures the daily growth or reduction in miner reserves and provides insights into whether miners are keeping or selling their newly mined coins.

The chart provided by CryptoQuant shows that miners were actively accumulating Bitcoin from mid-March to mid-April. However, a wave of selling pressure then occurred, causing the asset to fall from over $30,000 to under $27,300 in three days. This sustained selling pressure continued, causing Bitcoin to fall to a multi-month low of $26,260 on Friday.

Prior to last week’s plunge, miners experienced a surge in sales due to enthusiasm for Ordinals and BRC-20 tokens, which introduced Ethereum-like utilities (such as NFTs and tokenization) to the Bitcoin ecosystem. As a result, Bitcoin fees also increased, reaching an average of $30 per transaction on May 8. These additional fees added to miners’ revenues and represented a significant bonus on top of the standard 6.25 BTC per block earned.

While miners briefly had a positive net position during the BRC-20 hype, this quickly returned to negative territory as fees normalized

However, CryptoQuant expects selling pressure to subside soon. BaroVirtual stated that miners’ current net position values are consistent with previous instances when Bitcoin rallied, suggesting that miners may significantly reduce their selling pressure, slow down sales, or even stop them once Bitcoin reaches the $24,000 target.

In a recent interview, analysts at CryptoQuant expressed their belief that Bitcoin could recapture its previous all-time high of $69,000 by early next year, driven by institutional buy-in in late 2023. This outlook gives optimism to bullish investors.

In summary, miners’ reduction of their reserves may be contributing to the local decline in the Bitcoin price. However, one analyst believes that this trend may soon reverse. Despite the current market conditions, there is an expectation that Bitcoin will regain value due to institutional interest in the future.

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(Featured image by QuinceCreative via Pixabay)

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First published in  COIN KURIER, a third-party contributor translated and adapted the article from the original. In case of discrepancy, the original will prevail.

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