CryptoQuant, a blockchain analytics company, has released new data demonstrating how quickly miners sell their bitcoin holdings.
At the end of last week, 14,000 bitcoin, worth more than $300 million at their current price, were moved out of miners’ wallets in a single 24-hour period. In addition, over the past several weeks, miners have sold the most bitcoin since January 2021. “Miner capitulation” is a phenomenon that often means that miners are getting ready to sell their already earned coins to pay for continued mining costs.
The bitcoin price is $21,600, having increased by around 3% over the previous day. However, the whole cryptocurrency market has been in a downturn for some months, with bitcoin down over 70% from its record high of about $69,000 in November 2021.
As the conflict between Russia and Ukraine continues, inflation rises, and energy prices are at all-time highs.
Some miners are selling bitcoin at the current price in an effort to limit their exposure to future market volatility and reduce the risk to their bottom line. However, lower bitcoin prices and increased energy costs reduce miners’ profit margins.
According to Citi analyst Joseph Ayoub’s note from July 5, “given growing power prices and bitcoin’s sharp price decrease, the cost of mining a bitcoin may be more than its price for certain miners.”
The email stated, “With high-profile stories of resignations from mining businesses and miners who have used their equipment as collateral to borrow money, the pressure on the bitcoin mining sector may be mounting.
‘Our costs, expenses, and liabilities are in dollars’
One of the biggest U.S. publicly listed cryptocurrency mining businesses, Core Scientific, sold almost all of its bitcoin in June. According to CEO Mike Levitt, bitcoin miners must pay their expenses like any other firm.
Levitt says, “We mine and create bitcoin, but our costs, obligations, and liabilities are in dollars.
According to Levitt, bitcoin mining is still profitable, with industry margins of about 50%. When they were at their highest, margins were at 80%.
Core sold 7,202 bitcoins last month at an average price of $23,000. But, according to Levitt, they spent roughly $167 million in profits mostly on growth-oriented ventures, such as new ASIC servers and more data center space for their self-mining and colocation companies.
However, they also used a portion of that money to pay off debt and to settle employee stock awards that had been given out for five years.
Because the company has such high operational leverage, in the long run, Levitt is upbeat. Every dollar increase in the price of bitcoin beyond a particular threshold represents 100% operating income for bitcoin miners.
If bitcoin were to return to $35,000 or $40,000, “we would all be applauding loudly.” That is beyond question,” he remarked.
However, productivity per unit of power is also important, and large-scale miners like Core Scientific typically face less competition from amateurs and small companies when costs are low.
As less productive miners leave the network, the global hashrate, or the level of competition for the creation of bitcoin, declines as prices fall, according to Levitt.
The hashrate, a measure used to indicate the combined computing power of all bitcoin miners, has decreased by 15% over the past month. However, it is ultimately a good thing for the large-scale miners who can afford to weather the downturns.
Machines that continue to mine bitcoin become more productive when less productive miners leave the network and the world’s hashrate decreases.
And thus, as Levitt put it, “the cost of energy, if you will, per bitcoin generated goes down.”
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