If publicly traded bitcoin mining companies sell off a large portion of their supply, it could drive the price of bitcoin even lower, according to Arcane Research, a crypto data firm.
If bitcoin mining companies (usually Ultimate Hodler) are starting to sell off their assets, it must be a bear market.
According to a new report from Arcane Research, publicly traded mining companies like Marathon Digital and Riot Blockchain sold more bitcoins than they produced last month, after selling only 30 percent of the bitcoins they mined in the first four months of the year.
Jaran Mellerud, a bitcoin mining analyst at Arcane Research, wrote in a report, “If they are forced to liquidate a significant portion of their bitcoins, it could further depress the bitcoin price.”
In May, publicly traded bitcoin mining companies sold more bitcoin than they produced. Source: Arcane Research
Yesterday, in an effort to reduce its debt, Toronto-based Bitfarms sold 3,000 bitcoins, nearly half of its supply, and Bitfarms CFO Jeff Lucas said in a press release that future plans are to no longer put all of its daily bitcoin production on HODL.
“While we remain bullish on the long-term appreciation of the bitcoin price,” he said, “this change in strategy allows us to focus on our top priorities of maintaining our world-class mining operations and continuing to grow our business in anticipation of economic improvements in the mining industry. “
Indeed, publicly traded mining companies have accumulated large amounts of bitcoin. According to Bitcoin Treasuries, seven of the top 10 bitcoin vaults belong to publicly traded miners. Among them, Core Scientific (CORZ) has 8,497 BTC; Marathon Digital Holdings (MARA) has 8,133 BTC; Hut 8 Mining (Hut) has 7,078 BTC; Riot Blockchain (Riot) has 6,536 BTC; Hive Blockchain (Hive) has 4,032 BTC; Bitfarms (BITF) has 3,075 BTC; and Argo Blockchain (ARBK) has 2,317 BTC.
However, it’s worth noting that the listed miners account for only 20% of the Bitcoin network’s 206 million terrahashes per second (TH/s).
The bitcoin network’s hash rate is a broad measure of how much computation is being used to mine bitcoins. Each hash means that a computer generates a new number to “guess” a cryptographic string. Whichever miner (or pool of miners) guesses correctly earns the right to verify the transaction block and add it to the blockchain.
When this happens, the miner receives a reward and a transaction fee. But mining is becoming less profitable as the market continues to slump.
Since the beginning of this month, miners have struggled to earn more than $20 million per block. According to Blockchain.com, revenue per block was around $50 million at the beginning of the year, dropping to just under $40 million in early May, a figure that fell to $16 million last week during the panic that engulfed hedge fund Three Arrows Capital and cryptocurrency lender Celsius.
