Bitcoin miners have logged the most coins on OTC platforms in two years. What does this mean for the crypto market?
The threat of another Bitcoin correction remains stably high. In early August, the cost of the main cryptocurrency has already fallen to the level of 49 thousand dollars. And as experts believe, this scenario may happen again. All to blame for the huge volume of cryptocurrency at the disposal of miners, which reached its maximum over the past two years. This suggests that the market is forming conditions for a collapse.
Recall, OTC stands for “Over-the-Counter”, which can be translated as transactions “past the counter”. We are talking about platforms where transactions with digital assets are conducted directly between the buyer and the seller.
In this way, the parties have no influence on what is happening in the market, as they exchange assets in the form of normal transfers. Accordingly, the selling party does not create orders on the exchange that put pressure on the coin’s rate and lead to its decline.
Buying cryptocurrencies by investors
OTC platforms are favoured by large market participants. For example, they can be early investors of a certain coin, who purchased it at a much lower rate.
Miners are also clients of such platforms. The latter often have serious stocks of bitcoins accumulated in the early years of the cryptocurrency. Still then, it was possible to mine BTC with a regular processor, and the reward for a block was 50 coins.
How many bitcoins do miners have?
According to Cointelegraph’s sources, there have been several cases in the history of the crypto market when a large balance of miners for OTC deals led to a noticeable collapse in the BTC chart.
The average collapse level reached 63 per cent over several months, which is clearly relevant to the start and continuation of bearish trends in the niche of cryptocurrencies, which are characterised by the most severe drawdowns.
Cryptocurrency market collapse
According to the experts of CryptoQuant platform in the latest report, now the OTC balances of BTC miners have reached a level that has not been observed since June 2022. Moreover, in the last three months alone, this figure has increased by more than 70 per cent.
Judging by the data in the blockchain, it has now reached the level of 368 thousand BTC, which is equivalent to about $22.36 billion. Here is the experts’ commentary on the matter.
The significant growth of OTC balances indicates a great activity of those miners who are ready to sell cryptocurrency right now.
OTC miner balances
In May 2018, after the balance of miners exceeded the level of 400 thousand BTC, the price of Bitcoin was $8,475. By December 2018, the price had dropped 63 per cent to $3,183.
As you can see, experts are talking just about the beginning of the previous bearish trends, which are characterised by a market downturn over several years and a decrease in buyer activity. In this regard, such transactions have a more noticeable impact on the market.
Similarly, in November 2021, when the price of BTC was around $64,000 and the balance of miners reached an all-time high of 500,000 BTC, the value of the cryptocurrency dropped by 45 per cent to $35,058 just two months later.
The desire of miners to get rid of their mined coins as quickly as possible is explained by the consequences of Bitcoin halving, during which the rate of issuing new BTC is halved. The last one took place on 20 April 2024, when the reward per block sagged from 6.25 to 3.125 BTC.
Currently, the average first cryptocurrency miner is mining it at a loss to themselves. According to analysts, the average cost of mining one bitcoin is $72,224, while today Bitcoin costs more than $61,000.
Revenues of large mining companies
Despite this, the activity of computing equipment owners in the Bitcoin network is not getting lower. For example, today the total hashrate of the blockchain of the first cryptocurrency has risen to the zone of its historical maximum.
This means that BTC continues to be a coveted asset among owners of ASIC miners.
Hashrate changes in the Bitcoin network
CryptoQuant experts explained that miners prefer over-the-counter (OTC) transactions to sell bitcoins because they seek better transaction terms. In addition, they want to avoid a significant impact on the price of the coin, as is the case when selling on cryptocurrency exchanges, due to the greater liquidity in the OTC market.
However, the recent reduction in Bitcoin supply on centralised exchanges and the whales’ accumulation of over 94,700 BTC in the last six weeks may balance the selling pressure and keep the main cryptocurrency’s chart flat.
The growing number of bitcoins on OTC platforms does indicate the desire of certain participants to get rid of their own coins. However, it is important to consider several key factors here. Firstly, such platforms are specially designed to minimise the impact of large transactions, which they successfully cope with. Secondly, in September, the US Federal Reserve Board will finally move to lower the base interest rate, which will make financial loans more affordable. Well, this usually leads to the activation of economic actors, including the connection with high-risk assets, which cryptocurrencies represent.
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