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Cryptocurrencies are falling
The market environment has worsened
Mining companies sell bitcoin holdings to cover operating costs
If you look at Bitcoin’s performance over the past few months, you get the impression that a new crypto winter has broken out. The original cyber motto has now significantly departed from its all-time high of nearly $ 69,000, reached in November 2021. One BTC is currently only trading at a value of around $ 30,000.
At the same time, the market environment has deteriorated sharply in recent months. For example, high inflation and high energy prices weigh on consumers and businesses, combined with tightening monetary policy for less liquidity on the markets. Furthermore, the crown measures and Russia’s aggressive war against Ukraine are causing uncertainty. The collapse of the algorithmic stablecoin Terra, which in reality should have always replicated the value of one US dollar, also had a particularly disadvantageous effect on the cryptocurrency market.
High energy prices put pressure on profitability
These stressors are also weighing on companies that have made bitcoin mining their mission. They suffer from currently extremely high energy prices, as cryptocurrency mining consumes huge amounts of energy. On the other hand, BTC’s low prices mean that mining itself is becoming less and less profitable, which is why many professional Bitcoin miners have been forced to sell part of their Bitcoin holdings to cover operating costs.
Bitcoin mining companies dump coins on the market
Coin Metrics data compiled by Compass Mining shows 195,663 coins were transferred by miners to cryptocurrency exchanges in May, Bloomberg reports. This was the largest monthly increase since January. Based on the average price of bitcoin in May, it would have been around $ 6.3 billion. However, the news portal also points out that transferring coins to cryptocurrency exchanges does not necessarily prove they were sold there. After all, they could have been transferred for other purposes. However, according to CoinDesk, Compass Mining writes: “Miners may start selling their held bitcoins on the open market. At the very least, they are suffering from the recent price drop. Along with a downward difficulty adjustment, indicating that miners are the closure – it seems to be happening, it would hit the miners to a limit in terms of profitability. ”
For example, Bitcoin mining company Riot Blockchain announced in a press release in early June that it sold 250 BTC in May, raising about $ 7.5 million. The company had already sold 250 coins in the previous month, which would have matched nearly half of the Bitcoins mined in April, CoinDesk reports. However, by that time, Riot Blockchain had raised $ 10 million.
Argo Blockchain, another bitcoin mining company, also said during a Q1 2022 conference call that it plans to borrow and reduce its bitcoin holdings to meet ongoing costs.
Cathedra-Bitcoin is separating from almost all bitcoin holdings
In addition to these larger mining companies, numerous smaller mining companies also started during the latest bullish cycle in cryptocurrencies, betting on the further upward trend of cyber currencies. One of these smaller companies is Cathedra Bitcoin. The cryptocurrency firm was hit hard by the cryptocurrency’s downturn, according to a statement released in late May. In it, Cathedra Bitcoin revealed that by the end of May almost all holdings in Bitcoin (235 BTC) had been sold as mining and macroeconomic conditions had deteriorated dramatically. At the end of May, the company held only 3.69 BTC.
According to CoinDesk, other mining companies that have recently separated from parts of their Bitcoin holdings or intend to do so include Core Scientific, Marathon Digital, and Digihost. At the moment it is still uncertain when this trend will subside again. However, as long as energy costs remain so high and cryptocurrencies decline, mining companies are likely to continue to struggle.
Financeen.net editorial staff
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