A recent on-chain analysis conducted by the market intelligence platform CryptoQuant reveals a notable alleviation in the selling pressure exerted by Bitcoin miners, despite a significant decrease in transaction fees.
In its most recent weekly report, CryptoQuant notes that the daily volume of Bitcoin sold by miners currently stands at approximately 300 BTC, a considerable decrease from the 800 BTC daily sales recorded by these entities in November and December of 2023.
The Sustained Reduction in Bitcoin Miner Selling Pressure
Throughout 2024, the selling pressure exerted by Bitcoin miners has remained subdued, coinciding with efforts by the largest publicly traded mining firms to replenish their Bitcoin holdings. This augmentation in the holdings of these companies occurs concomitantly with a reduction in miner profitability, marking the most substantial decline observed in at least a year.
Analysts at CryptoQuant indicate that metrics assessing miner profit/loss sustainability demonstrate that these entities have predominantly experienced substantial underpayment in 2024, primarily due to decreased transaction volumes on the Bitcoin network. The daily transaction count for Bitcoin has descended to a three-month nadir of 278,000 transactions, a notable decline from the all-time peak of 731,000 daily transactions registered in December.
Factors Contributing to the Decline in Bitcoin Transactions
The decrease in Bitcoin transactions can be ascribed to diminished activity pertaining to Ordinals inscriptions and BRC20 tokens. This trend is further corroborated by the considerable reduction in transactions utilizing taproot addresses, which have plummeted by 76% since December.
Analysts expound that the diminished transaction activity, particularly the decreased usage of taproot addresses for inscriptions and BRC20 tokens, exerts a downward pressure on Bitcoin transaction fees. Indeed, the total daily Bitcoin fees have contracted from 560 on December 15 to 53 on February 5, marking a precipitous 90% decline during this period, coinciding with the reduction in taproot transactions.
Recovery in BTC Investor Demand
In addition to the mitigation of miner selling pressure, the downward pressure on BTC’s price has moderated as the asset gravitates toward the cost basis of short-term holders and traders. Moreover, the BTC price premium observed on the crypto exchange Coinbase indicates a partial recovery in demand from Bitcoin investors in the United States.
Nevertheless, participants in derivative markets have yet to regain sufficient control to sustain a substantial price rally. Sell orders continue to predominate, as evidenced by the buy-sell ratio remaining below zero. Nonetheless, BTC’s price has witnessed a notable increase in recent days, nearly touching the $48,000 mark on Friday.
It is noteworthy to highlight that CryptoQuant’s analysis diverges from a recent report by Bitfinex, which attributed the recent decline in BTC’s price to a selling spree among Bitcoin miners. Bitfinex suggested that miners are divesting their BTC reserves to secure capital and upgrade infrastructure in anticipation of the forthcoming Bitcoin halving event.