The Citi analysis points to the increased sophistication and cost of mining as a major driver for growth in bitcoin supply.
As mining costs rise, miners come under pressure to sell their freshly unearthed bitcoin to recoup the costs of their investment in equipment. Citi notes that about 3,500 BTC are mined daily, against a backdrop of 60,00010,000 BTC in daily trading volume in recent months. The research note says:
If the miners are a steady source of supply and there is no increase in final demand, we have this overhang of bitcoin being sold in the market. In consequence, we have downward price pressures.
I'm interested in knowing more about this, specifically about the downward pressure caused by miners selling their bitcoin. What type of pressure could this be causing? Anything measurable?
Since miners create 3,600 new BTC per day, they will likely need to sell at least a portion of these because they need to pay for current expenses like electricity. They also need to start to pay themselves back (or their source of capital for their miners) for the cost of the miner so they can ROI.