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Bitcoin miners are once again ’Hodling,’ but for how long?
As the bitcoin price falls, some bitcoin miners are likely to spend some of their mined coins to cover expenses and growth.
According to on-chain analytics startup Glassnode's data, cryptocurrency miners are beginning the new year by raising their bitcoin holdings. However, given the recent precipitous drop in bitcoin prices, some miners may be obliged to monetise their mined bitcoins.
The "miner nett position change," which records the 30-day change in nett buying and selling activity in miners' addresses, has experienced a big positive movement since Jan. 6 and has carried through well into the second week of January, despite the fact that the bitcoin price has dropped to over $40,000.
Following the massive increase in supply stored in miners' wallets, the balance kept in miner wallets climbed by around 6,474 bitcoins to approximately 1.826 million as of Tuesday, compared to 1.82 million in December, according to Glassnode data. Miners' wallets may contain bitcoin from sources other than mined coins every day.
"We expect this trend of miners holding on to their bitcoin awards to be a result of them being responsible with their finances and retaining their crypto till prices rise," said Danni Zheng, investment director at BIT Mining. "We anticipate that other miners, like us, will wait to sell our bitcoin holdings strategically in order to lock in the best possible gains.""
Furthermore, another statistic indicating similar mining holding tendencies has reached an all-time high. According to Glassnode data, the "miner unspent supply," or the total number of coins awarded to miners for solving a block but never moved on-chain, hit a new high of 1.779 million on Tuesday.
""As the price of bitcoin falls further, miner unspent supply grows and miner nett position change becomes more positive," said Marcus Sotiriou, an analyst at the U.K.-based digital asset broker GlobalBlock. According to Sotiriou, this shows that bitcoin as an asset is becoming more scarce as miners want to keep their mined coins rather than sell them.
Bitcoin proxy
When bitcoin reached all-time highs in 2021 and the total network hashrate was relatively low, miners benefitted by keeping the mined digital currency on their balance sheet. The high leverage to bitcoin allowed publicly traded miners' shares to ride the boom in bitcoin prices and enabled miners of all sizes access to financial markets.
"The hodl strategy paid off in 2021 as miners were rewarded for a strong allocation to bitcoin in their treasury management," said Ethan Vera, chief operating officer of Luxor, a Seattle-based mining company. And the pattern is expected to continue this year, as many miners continue to be viewed as a proxy for bitcoin in public markets, owing to a delay in the regulatory approval of a spot bitcoin exchange-traded fund in the United States, he noted.
Miners didn't have to sell their bitcoin to cover operational costs because they had plenty of funding and investors pouring money in, according to Compass Mining CEO Whit Gibbs. "And because miners are quite bullish on bitcoin, this naturally allows them to do what they want to do, which is speculate on bitcoin's good price appreciation," he continued.
Spending using Bitcoin
To be clear, not all miners follow the same strategy, and while some kept all or most of their mined bitcoins last year, others reinvested some of them in their businesses. Indeed, bitcoin miner CleanSpark said on January 6 that it sold 414 bitcoins in December at an average price of $49,791 to fund the company's growth and operations.
Keeping the mined bitcoin, however, may no longer be viable for some miners, as the bitcoin price has dropped more than 30% since reaching an all-time high in November, and competition is projected to increase as the network's hashrate increases this year.
"Many miners are holding on to mined BTC in the hope that the price will rise," said Juri Bulovic, Foundry's head of mining. However, "with the recent drop in pricing and poor start to 2022," he noted, "some would now have to sell more mined BTC than previously to satisfy their monthly costs."
Diluting should be avoided
Using some of the mined crypto money to reinvest in the company's business, on the other hand, may end up benefiting the miners by allowing them to fund their expansion without issuing more shares or raising their debt load. "The disadvantage of 100 percent hodling is that operating expenses must then be financed through debt or dilution," stated CleanSpark executive chairman Matthew Schultz.
"We continue to see value in using BTC to fund operating expenses and growth, as well as as a preferred store of value when compared to USD," he added.
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By Crypto PiratesAs the bitcoin price falls, some bitcoin miners are likely to spend some of their mined coins to cover expenses and growth.
According to on-chain analytics startup Glassnode's data, cryptocurrency miners are beginning the new year by raising their bitcoin holdings. However, given the recent precipitous drop in bitcoin prices, some miners may be obliged to monetise their mined bitcoins.
The "miner nett position change," which records the 30-day change in nett buying and selling activity in miners' addresses, has experienced a big positive movement since Jan. 6 and has carried through well into the second week of January, despite the fact that the bitcoin price has dropped to over $40,000.
Following the massive increase in supply stored in miners' wallets, the balance kept in miner wallets climbed by around 6,474 bitcoins to approximately 1.826 million as of Tuesday, compared to 1.82 million in December, according to Glassnode data. Miners' wallets may contain bitcoin from sources other than mined coins every day.
"We expect this trend of miners holding on to their bitcoin awards to be a result of them being responsible with their finances and retaining their crypto till prices rise," said Danni Zheng, investment director at BIT Mining. "We anticipate that other miners, like us, will wait to sell our bitcoin holdings strategically in order to lock in the best possible gains.""
Furthermore, another statistic indicating similar mining holding tendencies has reached an all-time high. According to Glassnode data, the "miner unspent supply," or the total number of coins awarded to miners for solving a block but never moved on-chain, hit a new high of 1.779 million on Tuesday.
""As the price of bitcoin falls further, miner unspent supply grows and miner nett position change becomes more positive," said Marcus Sotiriou, an analyst at the U.K.-based digital asset broker GlobalBlock. According to Sotiriou, this shows that bitcoin as an asset is becoming more scarce as miners want to keep their mined coins rather than sell them.
Bitcoin proxy
When bitcoin reached all-time highs in 2021 and the total network hashrate was relatively low, miners benefitted by keeping the mined digital currency on their balance sheet. The high leverage to bitcoin allowed publicly traded miners' shares to ride the boom in bitcoin prices and enabled miners of all sizes access to financial markets.
"The hodl strategy paid off in 2021 as miners were rewarded for a strong allocation to bitcoin in their treasury management," said Ethan Vera, chief operating officer of Luxor, a Seattle-based mining company. And the pattern is expected to continue this year, as many miners continue to be viewed as a proxy for bitcoin in public markets, owing to a delay in the regulatory approval of a spot bitcoin exchange-traded fund in the United States, he noted.
Miners didn't have to sell their bitcoin to cover operational costs because they had plenty of funding and investors pouring money in, according to Compass Mining CEO Whit Gibbs. "And because miners are quite bullish on bitcoin, this naturally allows them to do what they want to do, which is speculate on bitcoin's good price appreciation," he continued.
Spending using Bitcoin
To be clear, not all miners follow the same strategy, and while some kept all or most of their mined bitcoins last year, others reinvested some of them in their businesses. Indeed, bitcoin miner CleanSpark said on January 6 that it sold 414 bitcoins in December at an average price of $49,791 to fund the company's growth and operations.
Keeping the mined bitcoin, however, may no longer be viable for some miners, as the bitcoin price has dropped more than 30% since reaching an all-time high in November, and competition is projected to increase as the network's hashrate increases this year.
"Many miners are holding on to mined BTC in the hope that the price will rise," said Juri Bulovic, Foundry's head of mining. However, "with the recent drop in pricing and poor start to 2022," he noted, "some would now have to sell more mined BTC than previously to satisfy their monthly costs."
Diluting should be avoided
Using some of the mined crypto money to reinvest in the company's business, on the other hand, may end up benefiting the miners by allowing them to fund their expansion without issuing more shares or raising their debt load. "The disadvantage of 100 percent hodling is that operating expenses must then be financed through debt or dilution," stated CleanSpark executive chairman Matthew Schultz.
"We continue to see value in using BTC to fund operating expenses and growth, as well as as a preferred store of value when compared to USD," he added.
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