The number of bitcoin (BTC) held by crypto miners has dropped to the lowest level since July 2021, according to data tracked by Glassnode. The estimated number of BTC held in wallets tied to miners fell by 8,426 BTC ($530 million) since the start of the year to 1,812,482 BTC. This decline began in the second half of October when miners held over 1.83 million BTC.
One possible explanation for this decrease in BTC holdings is the impending reward halving, a quadrennial event due in April. Currently, miners receive 6.25 BTC per block, but the halving will reduce that figure to 3.125 BTC, cutting per-block revenue by 50%. To improve profitability in the face of reduced rewards, miners may be using their stored BTC to buy more efficient equipment, thereby lowering running costs.
FRNT Financial, a crypto platform based in Toronto, suggested that miners may also be selling their BTC in order to better position themselves ahead of the halving. This could involve purchasing more efficient mining equipment to adapt to the new economics that the halving will bring.
The prolonged dry season in the southwest of China, which typically extends from October to March/April, could also be a contributing factor to the decline in miners’ bitcoin balances. China accounts for roughly 20% of the total computing power on the Bitcoin network, and miners in some Chinese regions are known to bring online additional hardware during the wet season when hydro power becomes abundant. During the dry season, miners may sell their BTC to counteract the inactivity of mining hardware.
The halving is widely seen as a stress test for miners, as it is expected to reduce revenues and boost production costs simultaneously. This could lead to industry consolidation as miners seek to adapt to the changing economic landscape of Bitcoin mining.
Overall, the decrease in BTC holdings by crypto miners reflects the challenges and adjustments they are making in anticipation of the upcoming reward halving and changing market conditions. As the halving approaches, it will be interesting to see how miners continue to adapt and evolve in the ever-changing world of cryptocurrency mining.