Why miners are selling their bitcoin at levels not seen since 2019

[ad_1]

Recent data shows a significant increase in the amount of bitcoin being moved by miners from the mining pool to crypto exchanges, but the price of the flagship cryptocurrency continues to show resilience. Miner sales volume hit its highest level on Friday since March 2019, according to blockchain data firm Glassnode. On the day BlackRock filed for a spot bitcoin exchange-traded fund, selling volume hit its highest level since September 2017. This selling behavior, implicated by miners moving mined bitcoin to exchanges, began at the end of May. Miners are still recovering from the brutal bitcoin selloff in 2022, when the cryptocurrency plummeted 65% and hurt their profitability. While bitcoin struggles to reach the $30,000 level after a memorable rally to start the year, it is still up around 85% in 2023, leading many miners to offload their bitcoin holdings to raise funds to fund their operations. “With bitcoin at $30,000, you have miners selling everything they produce because they’re either trying to pay off their debt or they’re trying to put some money on the balance sheet so they can buy more miners and grow because we have a halving in May next year,” said Fred Thiel, CEO of Marathon Digital, a mining company. “For many miners, the only way to raise capital or liquidity is to sell bitcoin.” He added that many miners sold off most of what they had in stock in the spring and are now selling all the bitcoin they produce just to build up cash on the balance sheet. A report from Standard Chartered on Monday estimated that the 12 largest listed miners sold 106% of bitcoin mined in the first quarter of this year, including stocks.The second quarter data will show a slight drop to just under 100 %, according to the report. The 12 companies account for 20% of all bitcoin mining, Standard Chartered said. There are around 900 bitcoins mined per day, and the flagship crypto’s typical daily trading volume is between $7 billion and $10 billion, meaning miners could sell 100% of what they produce today and it wouldn’t move the price of a lot of bitcoins, Thiel said. It costs around $17,000 on average for a miner to produce one bitcoin. The sale of miners should not weigh significantly on the price of bitcoin, however, according to Thiel. “Bitcoin miner operating costs are quite fixed, meaning you pay a fixed price for your electricity, which is what determines your marginal cost of production,” he said. “If the price of bitcoin increases by 60%, you can sell 40% less bitcoin and still have the same dollars in your pocket at the end of the month to pay your electricity bill.” Preparing for the Halving With the market-shaking event halving that occurs approximately every four years and tends to lead to a sharp rise in bitcoin prices expected to take place in the spring of 2024, there is has a race to add more computing power to miners, Thiel explained. This computing power is known as the hash rate. Bitcoin’s hash rate hit an all-time high on Saturday, according to Glassnode. If miners want to start seeing a return on their investment, they need to accelerate the development of their facilities and capacity. If they don’t add more hash rates before May 2024, it will take twice as long to generate their return, according to Thiel. “It’s really about producing as much as you can from time to time and then trying to liquidate what you can to maximize your balance sheet,” he said. The last halving took place in May 2020, just months after the last peak of bitcoin moving from miners to exchanges.

[ad_2]