According to data from ByteTree, Bitcoin (BTC) miners are selling at a faster pace than they are mining. Some analysts may call this miner capitulation, but it is actually a bullish sign for the Bitcoin (BTC) market as will be explained in this article. 

Specifically, ByteTree’s Miner’s Rolling Inventory (MRI) index is a way to gauge how fast miners are selling their inventories versus how fast they are mining new coins. If miners spend more Bitcoin (BTC) than they mine, then the MRI rises above 100%. On the other hand, if miners are spending less Bitcoin (BTC) than they mine, then the MRI drops below 100%.

Currently the MRI over the past 5 weeks is 104.7%, while the MRI over the past week is 112.9% since 6,815 Bitcoins (BTC) were spent by miners this week but only 6,038 were mined, which is a difference of 777 Bitcoins (BTC) worth over $7 million.

Essentially, miners have been selling at an accelerated pace. Indeed, a particularly fast miner dump may be responsible for the Bitcoin (BTC) price drop on June 2 from over $10,000 to as low as $9,300. 

Although miner dumping can suppress the market, especially if miners dump coins at a rapid pace rather than slowly and steadily, an increase in the rate at which miners dump coins is actually a sign of a bull market. 

This is because miners are constantly selling to pay for expenditures and to realize profits, and generally miners are experts on when is the optimal time to sell in order to maximize profits. Simultaneously, miners are careful not to damage the market. 

Therefore, when miners pull back on spending it is because the market does not have enough liquidity to handle their sell orders without being damaged, or the market price is unattractively low. On the other hand, when miners increase their spending it is because the market is at an attractive price and full of liquidity, making it an opportune time to sell off inventories and realize profits at a faster pace. 

In other words, an MRI over 100% indicates a bull market, while an MRI below 100% indicates a bear market. 

Indeed, ByteTree did an experiment where Bitcoin (BTC) was held if the MRI was over 100%, and the Bitcoin (BTC) was sold if the MRI fell below 100%. Ultimately this strategy proved to be automatically profitable, since the MRI being in excess of 100% typically corresponded with a bull market. 

Notably, in the same experiment it was found that averaging the MRI across a 3, 4, 5, or 6 week period was the most profitable strategy, and returns were definitively improved and drawdowns were decreased versus just holding Bitcoin (BTC) long term. 

Likewise, the same experiment was conducted except Bitcoin (BTC) was sold if the MRI was above 100%, and Bitcoin (BTC) was held if the MRI was below 100%. This strategy led to losses despite the price of Bitcoin (BTC) increasing 16-fold over the course of the experiment, definitively proving that the MRI is an excellent tool for diagnosing bear markets. 

Thus, miners are currently selling Bitcoin (BTC) much faster than they are buying it, which is indicated by the current weekly MRI being well over 100%. Rather than indicating bearish miner capitulation, this actually means that the Bitcoin (BTC) market is healthy right now, both in terms of Bitcoin’s (BTC) price and liquidity.

To put it simply, the MRI being well over 100% is a solid indicator that Bitcoin (BTC) is currently in a bull market. 

On a final note, considering how powerful MRI is for determining if the Bitcoin (BTC) market is bullish or bearish, and the fact that MRI-based trading strategies can be automatically profitable based on ByteTree’s experiment, every crypto trader should certainly keep track of the MRI.