It looks like the bearish market is hitting all sectors of the cryptocurrency space, including those that are charged with the responsibility of validating transactions and maintaining the network integrity of the Bitcoin network.
Data from Compass Mining reveals that Bitcoin miners are selling off their mined tokens as the tumbling price of bitcoin erases profit margins for these miners. This comes at a time when capital markets are becoming less friendly with major indexes officially entering a bear market, having lost 20% or more this year.
According to Compass Mining, a Bitcoin mining service company, that sourced data from CoinMetrics, revealed that miner flows to exchanges have reached their highest point since January 2022. Compass wrote, “Miners may begin to sell hodl’d Bitcoin into the open market. At the very least they are feeling the pain after the last major dip in price. Couple this with a downwards difficulty adjustment – indicating miners powering off – and it seems miners may be hitting a wall in profitability.”
What you should know
- Mining bitcoin has become less profitable as the price of the crypto has trended downwards since the start of the year. With popular mining machines like Bitmain’s Antminer S9 becoming money losers at electricity prices of six cents per kilowatt-hour.
- Struggling miners who would prefer not to shut down their rigs can look to raise capital in the debt or equity markets and/or sell off bitcoin holdings.
- Argo Blockchain (ARBK) plans to raise debt and sell some of its bitcoin to cover expenses, the company said in an analyst call for its first-quarter results.
- Core Scientific (CORZ), the world’s largest miner by hashrate, has already sold some of its mined bitcoin this year and plans to continue doing so. Previously, a confirmed HODLer, Riot Blockchain (RIOT) sold nearly half of its mined bitcoin in April after having also sold a sizable amount in March.
- Cathedra Bitcoin in a May 30 statement said it sold 235 bitcoins during the month in a move to raise liquidity and “insulate” itself from further price declines. The company also had a tough April, operating at 45% of expected hashrate throughout the month thanks to storms affecting its North Dakota site.
- There’s also Marathon Digital (MARA), which – at its earnings call in early May – suggested it may sell some of its bitcoin.
With many prominent Bitcoin miners selling their positions, it means that there will be more selling pressure in the market which casts a dark shadow over the market in the coming weeks. BTC, which at the start of the week was steadfast towards $32,000 has now made a U-turn, as it trades below $30,000 trading zone again.