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Cryptocurrency : Bitcoin Miner Mayhem as On-Chain Fees Fall 90% in Two Months

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Bitcoin has been hit by the bears for the third week in a row. As of this writing, BTC has lost two critical support zones at $ 35,000 and $ 32,000. The top cryptocurrency by market capitalization is trading at $ 31,987 with a correction of 10.5% on the daily chart.

Bitcoin BTC BTCUSD

BTC receives the Bear attack on the 24-hour chart. Source: BTCUSD Tradingview

The overall sentiment in the market appears bearish as BTC failed to gain a foothold in the high area around current levels. A report by Arcane Research concluded that the recent correction follows a week of low currency activity, a drop in activity on the chain and “futures premiums have almost disappeared.”

The research estimates that on-chain activity has dropped by around 69% since the beginning of May and the end of April. As a consequence, the BTC network fees were also reduced by almost 93%, as seen in the chart below.

Bitcoin BTC BTCUSD

Bitcoin BTC BTCUSD

Source: Arcane Research

The average daily transaction on the Bitcoin network has gone from $ 62 in April to $ 4.38 in early June. At the same time, the 7-day average mempool transaction has reached its lowest levels since April 2020, as determined by Arcane Research.

This has coincided with the mining sector’s increase in its BTC sales. After China imposed new limitations on the sector for certain large-scale BTC mining activities, some miners were forced to relocate their operations. Therefore, it seems logical that they sold part of their participation to obtain liquidity for expenses.

Lex Moskovski, CIO of Moskovski Capital, said that around 8,545 BTC left miners’ wallets in the last 4 days. Increased selling pressure has contributed to the recent slump.

Bitcoin BTC BTCUSD

Bitcoin BTC BTCUSD

Source: Glassnode via Lex Moskovski

Long-term Bitcoin holders seize the buying opportunity

Where some see fear, chaos and disorder, others see an opportunity to accumulate. Data from Glassnode suggests that the total supply of Bitcoin held by long-term holders has increased after reaching a plateau during March 2021.

Bitcoin BTC BTCUSD

Bitcoin BTC BTCUSD

Source: Glassnode via William Clemente

As seen in the graph below, the rise in these metrics turned parabolic in mid-May, when the price of BTC took its worst hit. These investors bought more than the entire supply of BTC sold by short-term investors. Analyst William Clemente believes this number is around 217,194 BTC. Clemente said:

The sale of the short-term holders had offset the purchase of the long-term holders, but now the purchase of the long-term holders is offsetting the sale of the short-term hodlers.

Other data recorded by Glassnode indicates that 744,000 BTC have been withdrawn from exchange platforms to cold wallets since March 2020, when the price of BTC fell to $ 3,000.

During May and part of June 160,700 BTC of this supply has returned to the market. Although it is a significant increase, it only represents 22% of the total supply that has cooled. Analyst Checkmate believes that this liquidation is a change in the conviction of a part of the market.

The fact that long-term holders have accumulated Bitcoin again is a bullish sign, but the analyst believes there could be similarities between this behavior and a period of accumulation in the 2018 bear market.

As seen in the fractal below, after a prologue distribution in early 2021, long-term forks can continue to accumulate as the price moves sideways or is trending down. The analyst added:

This fractal describes the tipping point where LTHs stop spending, start to accumulate again, and accumulate what are now considered cheap coins.

BTC BTCUSD

BTC BTCUSD

Source: Glassnode Insights

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