The price of Bitcoin dropped 3% and the reason can be miners who are selling BTC on exchanges once again. The price of Bitcoin (BTC) dropped from $10,580 to as low as $10,258 on Coinbase at the time of writing. This fall comes after on-chain data hinted at a potential miner sell-off.
Miners apply high selling pressure on Bitcoin
Throughout the past week, on-chain analysts said that miners have been selling relatively big amounts of Bitcoin.
Miners are one of unmatched sources of selling pressure in the crypto market besides exchanges. As a result, when miners move their mined Bitcoin it can cause immense selling pressure to build.
Cointelegraph reported about the transfer of BTC funds from major mining pools. Ki Young-Ju, the CEO of the analysis firm, said:
“As I know, some Chinese miners already realize their mining profitability (return on investment), and they might not want new mining competitors joining the industry because of the bull market.”
According to Glassnode, a metric that shows the inflow of capital from miners to exchanges just hit a five-month high. The previous spike happened in mid-August when BTC price hit its 2020 high of over $12,000, which was immediately followed by a correction toward $10,000.
“Bitcoin $BTC Miners to Exchange Flow (1d MA) just reached a 5-month high of 50.351 BTC Previous 5-month high of 44.479 BTC was observed on 14 August 2020.”
If Bitcoin recovers swiftly from pullbacks led by miners, it would show sufficient demand from retail investors on exchanges. But if the price continues to drop, it would suggest that there is not enough demand to absorb the selling pressure.
What traders say about BTC in the short term
In the short term, investors are generally cautiously optimistic despite the rejection of Bitcoin at the $10,500 level
They say that such a major resistance level is impossible to get breached at a first try. A minor rejection at the resistance was also likely given its historical importance.
A pseudonymous trader known as “Byzantine General” said short contract liquidations were hit after the first increase to $10,500. He said he expects a rebound or a minor drop to $10,100, explaining:
“As usual, liquidity levels are where it’s at. Liqs get taken, price dumps. We just took some liqs again. I can see this going back up from here, otherwise it maybe dumps a bit further to 10100.”
Scott Melker, another popular crypto trader, said that the $10,500 region was an important resistance for Bitcoin.
Considering the significance of the resistance level, the user said it is not likely to result in a major pullback. Melker said:
“Don’t expect a major resistance to be broken on the first test. Also, don’t expect the first rejection to lead to an epic dump.”
Meanwhile, in his current Bitcoin price technical analysis, trader Michael van de Poppe also pointed out this level as an important barrier to break in the short term. But for the bullish trend to continue previous resistance levels must be tested and confirmed as new support before moving higher, he says.
“On the upside, if the price of Bitcoin breaks through the $10,450 level, the potential and crucial pivot is structured between $10,900-11,000,” adds Van de Poppe.