On-chain data analyzed by cryptocurrency exchange Bitfinex shows that bitcoin (BTC) miners have entered an accumulation phase in preparation for the upcoming halving event scheduled for April 2024.
According to the latest edition of the Bitfinex Alpha report, the miner reserve metric indicates a significant accumulation trend from May 27, 2023, which has increased since bitcoin’s recent downturn from the $30,000 price level.
Bitcoin Miners Accumulate BTC
The bitcoin halving, which occurs every four years or after 210,000 blocks, is a mechanism that slashes the network’s miners’ rewards by half to reduce the speed at which new BTC is created and possibly increase the asset’s value. The upcoming one is the fourth since BTC’s inception and is expected to reduce the network’s rewards from 6.25 BTC to 3.125 BTC per block.
In response to the upcoming event, miners have shifted from a selling spree that began in August 2022 to the recent accumulation trend. Bitfinex found that July recorded restrained on-chain BTC outflows with a sudden increase towards its end. The exchange noted that the move was “likely a protective measure against potential resistance against buyers.”
Bitcoin mining firms have enhanced liquidity positions, reducing their tendency to sell more BTC. This can be attributed to the surge in their stock prices following the buzz around BTC exchange-traded funds (ETFs). With their strong financial reserves, the miners can expand their mining equipment and handle potential price downturns.
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Institutional Crypto Investors Apply Caution
As bitcoin miners increase their holdings, institutional crypto investors are applying caution to their investments. Bitfinex said this is because the broader market is “languid,” and trading volumes have slumped by 62% year-to-date.
“Volatility indicators show that we are in for quieter times overall. Bitcoin’s historical metrics seem to be settling, pointing towards an impending stabilization in market swings, with traders indicating a balanced market,” the exchange said.
Interestingly, bitcoin funds continue to see large outflows, while institutional investors have stopped shorting BTC via investment products for the first time in 14 weeks. The movement of funds aligns with investors locking in their profits.
“The overall behavior of institutional investors has been reflective of a cautious investment strategy into crypto assets and increasing profit-taking in the wake of a languid summer trading season,” Bitfinex added.
Meanwhile, several altcoins, including Solana, XRP, and Litecoin, have registered positive cash inflows.
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