Public bitcoin (BTC) miners are being forced to sell off their coins faster than they can unearth them as they look to claw back losses, cover costs, and repay debts in the wake of the market’s 60% plunge.
In July, the likes of Core Scientific, Argo, Bitfarms, Northern Data, and CleanSpark sold just under 160% of their production, making it the third month in a row that sales have outstripped the number of new coins coming in.
According to Arcane’s research, there are two main reasons for the sell-off. Firstly, mining firms are preparing to pay off expenses related to ambitious expansion plans. This would historically have been achieved through raising equity or increasing debt, but as capital markets also continue to struggle, they’re being forced to dip into their internal capital.
Secondly, companies with BTC or machine collateralized debt positions are looking to avoid margin calls. Indeed, Core Scientific and Bitfarms, sold 11,878 and 4,976 coins respectively between May and July.
Bad times across the board for bitcoin miners
Despite the sell-off appearing to slow, miners aren’t out of the woods yet.
Some of the largest players in the space lost a combined $1 billion in the past quarter due to impairment charges.
As reported by Bloomberg, Marathon Digital, Core Scientific, and Riot Blockchain, posted losses of $192 million, $862 million, and $366 million respectively while others also reduced the value of their holdings.
“The lower the bitcoin price goes, the more likely miners who follow this [hodl at any cost] strategy are to sell their bitcoin,” reads Arcane’s research.
“I expect the selling pressure to continue at between 100% and 150% of production unless something significant happens to the bitcoin price. This is equivalent to between 4,000 and 6,000 BTC per month,” (our emphasis).