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What will the Bitcoin Miners do about Consuming a Block Rewards Auction?

πŸ”΄ WHAT HAPPENS WITH THE MINERS? 😨

Few have realized it, but mining is in a high-stress situation, and many miners could be forced to have to capitulate their BTC or turn off their equipment.

What will the miners do? Here you will understand everything πŸ§΅πŸ‘‡

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Miners are essential for Bitcoin, thanks to them the network remains safe and functional.

However, they also have COSTS to cover, such as equipment maintenance or energy costs, and currently, not everyone can cover them…

But why? πŸ‘€

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Miners depend on the rewards for validating blocks to earn income in FIAT, but as you know, these rewards are in BTC. Therefore, the ideal goal for the miner is:

πŸ”Έ High prices in BTC/FIAT.

πŸ”Έ Validate as many blocks as possible.

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This means that the profitability of a miner will depend, for the most part, on the Block Rewards that he receives, and that these are higher than his costs.

HOWEVER, to achieve this, there are very important factors that must be taken into account... πŸ‘‡

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HASHRATE

It is currently held at very high levels, making it HARDER the chances of validating a block and therefore earning rewards.

πŸ“ With a high Hashrate, miners are pressured to invest in more or better equipment to keep competing.

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BTC PRICE

With a low BTC price, the rewards for validating blocks will have a lower value in FIAT. Currently BTC is at levels not seen since 2020.

πŸ“ At a certain point, this could cause miners' costs to be higher than their income.

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As we have seen πŸ‘†, none of the factors is favoring the miners. On the contrary, they are currently facing exactly what they are not looking for:

πŸ”Έ LOW prices in BTC/FIAT.

πŸ”Έ It is becoming more and more DIFFICULT to validate a block.

Now what could they do?

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I'm sure you can already guess... Some miners will have to make a key decision before it's too late:

1⃣ INVEST: ROI may be riskier due to BTC price

2⃣ DO NOT INVEST: lose ground and decrease your probability of validating blocks

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Where is the risk? πŸ“‰

Regardless of the decision, some miners are no longer profitable, and others may be forced to liquidate their BTC reserves in order to meet their costs.

Which, in fact, we are already beginning to see.

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CAPITULATIONS?

This OnChain metric relates BTC withdrawals from miners' reserves and compares them to their average 1-year withdrawals.

πŸ“ RESULT: For the past two weeks, miners have been withdrawing more BTC than usual.

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⚠️ What could happen?

We don't want to generate FUD, the amounts of BTC that the miners have capitulated are still few.

But, if the price continues to fall and the difficulty of mining creates more pressure, the possibility of a mining capitulation could increase.

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Currently the rewards of the miners in FIAT have decreased considerably, and despite the fact that their situation remains stable, the majority are under high financial pressure.

πŸ‘‰ It will be good to be alert to BTC shipments from miners to CEX.

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This post is based on this twitter thread.

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