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Bitcoin’s Plunge Was Foreshadowed by Miner Inventory Data

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The miner’s rolling inventory (MRI) figure, created by crypto markets data company ByteTree to measure the changes in inventory levels held by these key market participants, remained below 100 percent in January, suggesting a lack of confidence in the 30 percent price rally that month. 

100 percent. Miners tend to hoard mainly during bear markets than in bull markets.Source: ByteTree

An MRI above 100 means miners are selling more than they mine and running down inventory, while a below-100 MRI indicates hoarding – miners selling less than they mine and amassing inventory.

Conventional wisdom says that a seller always sells high. Thus, some investors may take a sub-100 MRI reading as a sign miners are anticipating a price rally and are therefore hoarding with an aim to liquidate at a high price at a later time.

Miners, however, operate on cash, notes Atlantic House fund manager and ByteTree founder Charlie Morris, and are always sellers in the market liquidating rewards (bitcoins) received for mining blocks to cover their operational costs. 

A below-100 MRI level is not necessarily a price-bullish indicator, but represents fear among miners the market is too soft to sell into. On the other hand, an MRI above 100 reflects a strong market able to absorb miners’ selling pressure. 

January’s MRI of 79 percent, the weakest in over two years, was essentially a warning sign that a bull trap was in the works. Bitcoin topped out near $10,500 in mid-February and has been falling.
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