According to Phillip Gradwell, Chief Economist at on-chain analytics and intelligence firm Chainalysis, Bitcoin (BTC) miners did send more Bitcoin to exchanges at the end of last week but so did others.
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Miners did not drive further price declines. Meanwhile, most of the BTC and ethereum (ETH) sellers in the “awful” last week were recent and new investors.
The announcement of tighter regulation on crypto mining and trading in China is one of the latest major entries to the list of possible causes of the most recent price fall. The announcement, however, has again raised questions in the industry about the importance of miners in the market, Gradwell wrote in his latest report.
But while miners are relevant for securing the network, “they have a limited effect on the market in the short-term.” 75% of BTC inflows to exchanges in May 2021 so far were from other exchanges, while miners were responsible for just 1% of exchange inflows.
“Miners do not provide that much liquidity to the market [and] while miners did sell more bitcoin at the end of last week, switching to selling on fiat exchanges rather than purely crypto exchanges, other people sold more bitcoin as well, so the relative importance of miners remained low,” the Chief Economist concluded.
According to ByteTree, in the past week, miners have sold more coins than they’ve generated. This hasn’t been the case in the past day though.
Cryptoasset prices are recovering after the last week’s selloff but major losses were recorded during the dip, as more than USD 3.2bn were sent on-chain at a loss by new investors, constituting the largest one-week USD loss of all time. However, the percentage losses were still below those of the 2017 and March 2020 crashes, according to Gradwell.
Large amounts of BTC being sent at a loss suggest that “people are heading for the exit and losses are being realized,” he said, adding that BTC 1.2 million was sent at a 5% to 25% loss, and BTC 120,000 was sent at a greater than 25% loss.
Nevertheless, it had a smaller number of bitcoin sent on-chain at a loss compared to the late 2017 and mid-March 2020 crash, showing that it wasn’t the worst bitcoin holders capitulation in history.
Still, it constitutes the largest realized loss when measured in USD terms, as at least USD 3.2bn worth of bitcoin was sold. Almost all of this loss was incurred by bitcoin held between 4 and 13 weeks prior to being sent, meaning that most of the sellers were recent investors.
Meanwhile, Ethereum (ETH) did experience the largest ETH holders capitulation ever recorded. According to Gradwell, ETH 22.6m was sent at a 5% to 25% loss, but there was a relatively small percentage of holders who sold at a 25% or greater loss. As such, realized ETH losses were not high in percentage terms.
Looking at the average cost of bitcoin and ether acquired by investors who entered in the last 12 months, Gradwell said as BTC dipped well below its average USD 37,800 acquisition price, recent investors were doubting their purchases.