After the Bitcoin price reached new highs in October, the largest public mining companies reported liquidation of cryptocurrency reserves. We tell you who sold coins and how many
More than a dozen of the largest publicly traded mining companies sold all their mined bitcoins in October, while the former cryptocurrency posted one of its biggest rallies since the crypto market crashed late last year.
Mining companies whose shares are traded on American exchanges submit monthly financial reports to the Securities and Exchange Commission (SEC), which, among other things, indicate the number of bitcoins sold and produced.. The 13 companies that disclosed information for October include Argo, Bitfarms, Bit Digital, Bitdeer Cipher, CleanSpark, Core Scientific, Digihost, DMG, Hut 8, Iris Energy, Marathon and Terawulf. Other major companies such as Riot, HIVE, Northern Data and Mawson have not yet reported their bitcoin sales.
Citing data from such reports in October, the authors of the industry publication TheMinerMag estimated that all 13 companies collectively liquidated 5,492 BTC with a total estimated value of about $164 million, taking advantage of the rise in the price of Bitcoin. Sales accounted for 100% of total Bitcoin production last month. For comparison: in the summer, the liquidation-to-production ratio among public mining companies dropped to 70%.
rbc.group Cumulative monthly bitcoin sales by 17 public miners. Source: TheMinerMag
Bitcoin mining is an energy-intensive process in which miners use specialized devices to confirm transactions on the Bitcoin blockchain and receive rewards in the form of new coins.. Currently, for each block of transactions added to the blockchain, miners receive 6.25 BTC, which is equivalent to approximately $220 thousand. at the exchange rate on November 8. This reward motivates them to keep the network running.
The reward is halved every 210 thousand. blocks as a result of the so-called halving, which occurs approximately every four years. Miners also receive transaction processing fees, an additional source of income that becomes increasingly important as the block reward decreases.
What is Bitcoin halving and how will it affect the price of the first cryptocurrency?
Several companies, including leading market players Marathon Digital and Core Scientific, had a sell-to-mined ratio of around 105%, meaning they sold additional quantities from their inventory in addition to the bitcoins they mined.. The companies Hut 8 and Bit Digital, according to the latest data, liquidated bitcoin reserves in October that significantly exceeded the volume of coins they mined. Both companies sold 365 and 422 BTC respectively, which for each amounted to more than 300% of their monthly mined coin volume.
These figures are significantly higher than in the previous three months, when the ratio of coins sold to mined was 64, 77 and 77% in July, August and September, respectively.. In June last year, amid the collapse of the cryptocurrency market and a sharp rise in the cost of electricity, this figure reached a maximum of 390%.
Sales and prices
Miners typically increase their Bitcoin sales to increase turnover or catch better prices during bull markets.. Bitcoin rose 28% last month to surpass $35,000, bringing its return over the past year to more than 100%. Shares of miners such as Marathon and Riot have also more than doubled this year.
Matrixport: miner shares could be the best investment for 2024
Among other factors, selling coins allows miners to raise capital to offset the impact of the halving, an update originally built into the Bitcoin code that will lead to a 50% reduction in mining rewards in the spring of 2024.. The halving changes the formula by which new Bitcoins are issued and aims to maintain the coin supply limit at 21 million.
The first halving occurred in November 2012, then in July 2016 and the last time in May 2020. Initially, miners received a reward of 50 BTC for a block of transactions added to the blockchain, but each time this amount was halved. The final reduction in rewards is expected in 2140, when the last Bitcoin will be mined. After this, miners will earn exclusively from transaction fees.
Bitcoin updates are planned to minimize the impact on the network itself, but they tend to be associated with significant price fluctuations for cryptocurrencies. Historically, a few months after the halving, the Bitcoin rate increased sharply. In anticipation of the halving, market sentiment tends to become bullish, which influences the behavior of traders.
Bitcoin price dynamics during past halvings. Source: ChartsBTC
In 2012, the first halving had minimal impact on the price of Bitcoin. However, already before the second halving in 2016, the cost of the main cryptocurrency increased noticeably. Similarly, in the year leading up to the 2020 halving, Bitcoin doubled in price.
Bitcoin is currently trading around $35,000, and its behavior ahead of the next halving may differ from early trends due to other macro factors, including the approval of Bitcoin exchange-traded funds (ETFs) from large management companies in the United States.