Futures: Coinbase Derivatives Exchange set to roll out BTC and ETH futures

Stablecoins: Tether Surpasses All-Time Market Cap High While Other Major Stablecoin Supplies Shrink

NFTs: Nike NFTs Will Be Incorporated Into EA Sports Games

Exchanges: Monthly crypto exchange volume tumbled in May, hitting 32-month low

DeFi: DeFi Blue Chips Suffer as More Users Stake Ethereum

Digital asset markets regained a bit of ground this week as the total market capitalization of all cryptocurrencies continued to hang onto the $1.1 trillion threshold. A surge of mid-week momentum sent the unit price of Bitcoin (BTC) in US terms to seven-day highs above $28,400, but that wasn’t enough to stave off BTC’s first monthly loss of the year in May. As of Friday Morning, BTC was trading around $27,000 up 62.7% in the year-to-date period, but down -11.5% from 2023 highs near $30,500 in April.

One of the key drivers of Bitcoin’s disappointing May performance was likely selling pressure from large Bitcoin miners and mining pools. On the final day of the month, Glassnode data showed a horde of 2,000 BTC was sent to Binance by a mining pool known as Poolin. When funds are sent to exchanges, it is likely that the owner intends to sell them sometime in the near term. According to CryptoSlate, Poolin's was the largest one-day Bitcoin transfer from miners to an exchange in two years. Corporate, publicly traded miners are also unloading a large amount of Bitcoin. For example, Canadian BTC miner Bitfarms sold 414 BTC ($11.3 million), representing 90.2% of 459 BTC the company mined in May. According to data from BitcoinTreasuries.net, Bitfarms has drawn down its reserve of BTC held on balance sheet from 3,301 BTC in Q4 2021 (worth $155.8 million at the time) to just 385 BTC (worth $10.4 million at current prices) through Q1 2023.

Miner revenue has been on the rise recently, jumping 13.7% MoM to $916.6 million in May on the back of surging transaction fees. That was the greatest sum of monthly revenue earned in over a year, but the cost of mining continues to rise as well. The costs that miners face are heavily influenced by electricity prices and fluctuations in Bitcoin’s hash rate – the computational power per second being used for mining. The seven-day moving average of the hash rate just hit a new record above 375.4 million terahashes per second (TH/s) on May 31, according to Blockchain.com data.

When hash rate rises, that indicates there are more miners competing for a fixed amount of BTC and expending a greater amount of electricity in that pursuit. In turn, that output pushes up the network’s difficulty calculation, automatically adjusted every two weeks, so that the time to solve a each new block of transactions gravitates toward a moving average of 10 minutes. Bloomberg reports that Bitcoin’s mining difficulty rose to an all-time high on Wednesday. MRP has discussed the dynamics of Bitcoin mining in greater detail throughout several of our Intelligence Briefings.

When costs rise in any business, profit margins can be compressed, which is likely why miners are choosing to offload a majority of the Bitcoin they’re earning in an effort to fund their business, instead of rebuilding their reserves. Though miner revenue was strong in May, a large portion of fees earned can be attributed to a short-lived boom in fees derived from inscriptions. Moreover, the trajectory of Bitcoin’s price was tracking lower – which likely means Dollar-denominated revenue could be headed lower in June if that pattern continues. MRP noted early this year that, for a miner recovery to remain on track, Bitcoin’s price will need to keep rising in tandem with its hash rate, otherwise, miners may face financial stress once again and resort to selling the BTC they mine – which itself risks driving BTC's market price even lower.

May 22, 2023: Tether Expands Profits, Dominance, and Bitcoin Holdings as T-Bills and Reverse Repo Become Reserve Standards →

February 22, 2023: Ethereum May Face Contagion from SEC Crackdown on Crypto Exchanges’ Staking Services →

February 14, 2023: Staking Services and Stablecoins in SEC Crosshairs as Crypto Industry Preps for Court Battles →

January 24, 2023: Bitcoin Mining is Back to Profitability, Hash Ribbon Shows Peak Capitulation May Have Finally Passed →

October 18, 2022: Fallout From Ethereum “Merge” Bolsters Bitcoin’s Hash Rate as Some Criticisms Still Linger →

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