Crypto Miners Now Hold Over 33k Bitcoin, 27% Less In Past 3 Months 2022
Crypto Miners Now Hold Over 33k Bitcoin, 27% Less In Past 3 Months 2022
According to recent statistics from Arcane Research, miners now have 27% less Bitcoin than they would have had the sell-off not started in May 2022. The amount sold by the public miners, as shown on the chart, indicates that they sold more than 100% of what they produced in May, over 400% in June, and less in July than in June. For the third consecutive month, the miners sold more than 100% of their production, selling 158% of the bitcoin they produced.
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Remember that Nairametrics previously covered a research report from Arcane Research that explained how declining cryptocurrency asset prices compelled Bitcoin miners—individuals with the computing power to solve the computational problem necessary to validate a block of Bitcoin transactions—to start liquidating their holdings. According to the study, 4,456 BTC were sold by public BTC miners in May, 14,600 BTC in June, and 6,200 BTC in July.
Crypto Miners Now Hold Over 33k Bitcoin, 27% Less In Past 3 Months 2022
Compared to the typical criterion of 25–40%, which was used in the first four months of the year, this represents a significant increase. This enormous increase demonstrates how the public miners have been compelled to start selling off their bitcoin holdings due to the declining profitability of mining as a result of the price declines observed. Arcane research, however, identified two primary causes for miners to sell their holdings:
Why Crypto Miners Are Selling Bitcoin
Arcane Research noted that the miners are still selling their holdings when looking at the percentage of the bitcoin production sold, even though we are witnessing an ease in public miners selling since they sold less than half as much in July as they did in June. The paper outlined two key causes for miners selling off their bitcoin holdings:
The first was that in order to reduce risk, public bitcoin miners needed money to expand. According to the report, public miners will soon incur considerable expenses due to their ambitious expansion plans. Equity, debt, or internal capital are the three sources of funding available to miners for capital investments. The public miners have historically preferred to hold onto internal funds in the form of bitcoin rather than raising equity or debt to finance growth. Miners are currently being forced to rely more and more on internal financing since the financial markets are drying up. The public miners are currently selling some bitcoin to prepare their bank accounts for upcoming payments in dollars because their expansion ambitions are some months away.
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The second reason given by the study was that the public miners are attempting to avoid being forced to liquidate their equipment due to a bitcoin or machine collateralized debt liquidation. In order to avoid margin calls, it was alleged that “miners with sizable BTC or machine collateralized debt positions were obliged to liquidate BTC. Core Scientific and Bitfarms, which sold 9,903 and 3,353 BTC in May and June respectively, had the highest stakes in such risky debt among miners.
Why this is important
The behaviour of public miners and miners, in general, is a good indication as to understanding if there are buyers or sellers in the market. As mentioned in the report, considering that public miners are selling their holding to fund their expansion plans, it means that Venture Capital organizations, private equity and other private and public funds are not looking to allocate funds in the cryptocurrency space at the moment. Recall that Nairametrics previously reported that venture capital investment in crypto has dropped by $3.2 billion in the first half of 2022, compared to H1 2021. This is a clear indication that the flow of funds is not going towards mining companies or the cryptocurrency industry at large.
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Another evidence of this is Prime Blockchain, a crypto miner, and 10X SPAC, mutually canceling a $1.25 billion merger deal. This cancellation means that Prime Blockchain will no longer list on the Nasdaq stock exchange following the cancellation of its $1.25 billion SPAC deal. Although the filing mentions that they mutually cancelled the deal, everyone in the cryptocurrency community can easily guess why this deal was cancelled as mining is becoming less and less profitable with Bitcoin’s price trading below $30,000 per token.
Crypto Miners Now Hold Over 33k Bitcoin, 27% Less In Past 3 Months 2022
Also, to note, there is now a huge focus from institutional investors and the entire crypto space in fact, on Ethereum’s native token, Ether than on Bitcoin. This is because of an upcoming event called “The Merge,” where the Ethereum blockchain will move from a Proof-of-Work consensus mechanism to a Proof-of-Stake mechanism, in which Vitalik Buterin himself touted that he expects the Blockchain to have a transaction throughput of up to 100,000 TPS. This is evident as Nairametrics reported a seven-week inflow into Ether-based products by institutional investors, the rally of Ether’s price above $2,000 and Ether, surpassing Bitcoin in the options market for the first time ever.
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What you should know
- The slow down in the sell of by Miners will be due to Bitcoin’s rally above $20,000 to trade as high as $25,000 before hitting a resistance. It looks like the 26% rally in the price of Bitcoin that happened in July gave the public miners some breathing room, and ultimately stopped the forced selling we saw in June.
- The report explained that some of the forced sellers from June spent that month restructuring their balance sheets. Core Scientific and Bitfarms were among the miners with the highest bitcoin and machine collateralized debt positions, but they both paid down significantly on these positions during June. These companies were the biggest bitcoin sellers in May and June, as they were forced to sell to avoid getting liquidated.
- The public miners are now collectively hodling 33,772 BTC, a 27% reduction from the all-time high in April this year. Until April, the miners HODLed between 60% and 80% of their mined BTC, but for the last three months, they have sold more than 100% of production.
- It is expected the selling pressure from the public miners will ease however not fall below 100% by our estimations. However, if we continue to see a significant rally, especially above $25,000, we could see a significant slowdown in the selling pressure from public miners and institutions as a whole.
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