Bitcoin: Why a drop in miner outflows could be good news
- Bitcoin miner flows reflect the current state of consolidation as transactions dip.
- Bitcoin miner reserves points towards redeemed long-term optimism.
Bitcoin miner metrics are often useful in providing a unique angle about market conditions. This is why the latest Glassnode alert regarding miner activity might be worth looking into.
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According to Glassnode, Bitcoin miner outflows have reportedly slowed down to the lowest levels in the last 19 months. For context, Bitcoin miner flows often increase in instances where they anticipate sell pressure, or when they have to sell their holdings to cover their expenses.
In this case, miner flows have been declining, meaning they have less of an incentive to sell.
📉 #Bitcoin $BTC Miners’ Outflow Volume (7d MA) just reached a 19-month low of 43.249 BTC
Previous 19-month low of 43.333 BTC was observed on 21 December 2021
View metric:https://t.co/DvHJapToPY pic.twitter.com/i1lBD1hCwl
— glassnode alerts (@glassnodealerts) July 21, 2023
In the last few weeks, we have seen a slowdown in Bitcoin volatility. The hype that we saw during the Bitcoin ordinals season has died down significantly compared to now. This is important because ordinals contributed to higher miner revenue. Now that the market has cooled down, there is less miner revenue and thus lower miner outflows.
The cooler market conditions and consolidation represent a more plausible reason for the current slowed miner outflows. Miner inflows have also dipped considerably in the last few days. It was worth noting that both miner inflows and outflows have dropped to historically significant levels.
Source: CryptoQuant
The common denominator here is lower transactions and thus lower fees. Unsurprisingly, Bitcoin’s transaction count has been declining for the last five days. It was down to 3-month lows or levels previously seen in April.
Source: Santiment
Bitcoin miner reserves point towards a growing market confidence
As noted earlier, Bitcoin miner inflows and outflows can be used to determine the level of confidence in the market. Well, BTC miner reserves can offer more clarity on the same. The miner reserve metric was at a healthy premium from its lowest level registered towards the end of May.
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The miner reserve metric registered a sharp bounce between 27 May and 3 June. It was the sharpest spike that it experienced in the last 12 months. Such a major shift suggests that more miners are willing to HODL rather than cash out for short-term profits.
Source: CryptoQuant
The miner reserve metric suggests that long-term confidence is returning to the market. Bitcoin holders should now be on the lookout for events that may strengthen the bullish outlook, as well as those that will lead to lower confidence.
