The latest research from digital asset-focused company Arcane on Bitcoin-Miner reveals that listed companies sold 100% of their mined coins in May due to reduced profit margins and volatile market conditions. The sales rate increased drastically from around 30% in the first four months of 2022.
During the bull market, publicly traded bitcoin miners tended to keep most of their mined coins when the landscape was in a sanguine state. However, when the dark times came and the primary cryptocurrency When it crashed below $30,000 in May, many miners were forced to abandon their HODL strategy by selling their coins, according to Arcane’s latest research.
One of the main reasons lies in “collapsing profitability” amid rising hashrate and bearish market conditions. The research found that extremely high profitability, as seen last November, led to massive investments in miners’ production capacity, resulting in “a growing hash rate while Bitcoin price has been falling.”
This phenomenon squeezed profit margins as miners had to use more computing power to achieve the same performance as in the past. Despite the benefits of access to cheap electricity and energy-efficient machines, some miners still struggled to generate net cash flow for their mining companies as Bitcoin’s nosedive showed no apparent respite:
“The rising hashrate and falling bitcoin price has pushed mining profitability to levels not seen since 2020. At $40 per MWh, the energy efficient Antminer S19 is currently generating $13,000 per bitcoin, down 80% from its November 2021 peak. The Antminer S9, our proxy for old generation machines, is now cash flow negative .”
Sell bitcoin for debt payments
It is worth noting that many listed miners could easily raise capital if the broader stock market remains bullish. It is common for miners to collateralize their machines and bitcoin holdings for loans used to cover operating costs and expand mining facilities. This allowed them to keep most of their bitcoins believing that the landscape will remain in such a bullish state.
For example, Marathon — the largest Bitcoin holder among all listed miners with 9,673 BTC on its balance sheet — had a total debt of $729 million as of March 31. The giant used most of the loans to buy machines – betting that the primary cryptocurrency could continue to appreciate in value.
With the asset’s price dropping drastically, lowering the value of mining equipment, many miners have had to sell their monthly production to pay off their debts and cover operating costs. Companies that run out of dry powders can even run into financial difficulties. The research is:
Miners have several options to fund their operations without selling bitcoin, e.g. B. issuing equity or taking on debt with their machines or bitcoin holdings as collateral. This was easy to do during the raging mining bull market of 2021 as capital flowed around. Market conditions are now completely changing and as a result we will likely see more miners deviate from their hodl-at-any-cost strategies.
Canada-based mining giant Bitfarms announced it will adjust its HODL strategy and sell 3,000 BTC – almost half of its total Bitcoin holdings – for about $63 million to improve its corporate liquidity. It was the latest example of miners deleveraging and deleveraging as market volatility soars.
Source: Crypto News Deutsch