With Bitcoin Price Slipping, Are Miner Selloffs To Blame?
When the bitcoin price slips into a prolonged downtrend as it has since its record high set in late 2021, all types of investors start pointing fingers at whomever seems the most likely culprit for the selloff. Are whales manipulating markets? Are paper-handed normies selling their bags? Are Wall Street suits suppressing price? Nothing strikes fear into the hearts of the Twitter masses, however, quite like the phrase: “Miners are selling.”
And it’s true: miners are selling, but that’s no reason to panic.
This article will explain some of the nuances behind historic miner selling patterns, review some recent announcements by miners regarding bitcoin sales and discuss why miners are selling their coins is a healthy market dynamic.
Which miners are selling their bitcoin?
Several prominent mining companies have made announcements or commented during earnings calls regarding recent selling activity. Riot Blockchain sold 250 BTC in April to generate roughly $10 million in cash. Core Scientific told investors it has been selling some coins throughout the year and that we should “expect that will continue to be the case.” Marathon Digital also told investors it is willing to sell some coins “as needed for treasury management.” Cathedra sold 235 BTC in May as part of recent measures to “reduce risk and strengthen its balance sheet.”
On-chain analysis of bitcoin held by mining entities also shows a slight decrease in holdings. The number of bitcoins stored in addresses that are one hop from mining entities has dropped 2.5% from 2.6 million BTC down to 2. 54 million BTC, according to data from Coin Metrics. Zero-hop addresses hold 1. 79 million BTC, down 0.1% over the same period, per the same source.
Why Are Bitcoin Miners Selling? The reasons for treasury management decisions made by any mining company can vary greatly. At a basic level, if a coin’s dollar value is lower than the price of the coin, miners might have to sell more coins to pay the same operating expenses. With hash price, a measure of revenue per unit — decreasing steadily ,, miners may be selling extra coins to supplement their rainy-day funds.
Self-preservation is vastly different from bearishness. Miners are still discovering new blocks every 10 minutes. Roughly 900 BTC are still being mined every day. The miners are doing their job. It is a good thing that miners are selling a few coins to help them continue their tasks. But it should not be a cause for panic.
Who Cares If Bitcoin Miners Are Selling?
Miners are selling bitcoins recently because the market is down and prices are falling. Miners sell bitcoin regardless of market conditions. Miners who have other revenue sources to finance their operations, such as a salary-paying home miner or large institutional miners that take out loans, can only hold every mined bitcoin. Long-time bitcoin miner Kevin Zhang, for example, told Twitter about some early years in his mining career when his team would sell 2,000 BTC per month to cover electrical costs. The market’s effect on miner selling is minimal, especially in today’s environment with sophisticated traders and liquid markets. At current prices, the daily average number of newly mined coins (900 BTC) is worth roughly $27 million. Bitcoin’s 24-hour trading volume was over $11 billion at the time of writing, according to data from Kraken’s Cryptowatch. If miners were to sell every new coin they come across, this amount would be barely 0. 25% of a single day’s total bitcoin trading volume — absolutely no one would notice. Market data shows that nobody notices. For example, in early 2021 when a relatively significant reduction in miner holds was detected in on-chain data, bitcoin’s price didn’t just not react. It saw a strong rally. The market is almost completely unaffected by miners. This is even more true when compared to the gold market where miners usually liquidate all their mined materials. Yet, global markets for yellow metal have survived for thousands of years and even thrived.
Don’t Worry About Miners Selling Bitcoin
Shifts in the bitcoin market cycle are made apparent when everyone focuses on miners who sell compared to ones who market-buy bitcoin. For example, in January 2021, Marathon Digital made headlines for market-buying $150 million in bitcoin on top of the coins its facilities were mining. Argo Blockchain also sold some of its cash for bitcoin around the same time.
Think about what the bitcoin economy would look like if miners didn’t sell, which is something many bitcoin investors want. There wouldn’t be a bitcoin economy. There would be no bitcoin economy. Only miners would own bitcoins, and only mining could allow anyone to access them. The coins can’t even be spent on anything after mining. With a lower price and marginally poorer mining economics, everyone panics when there is a headline that says that miners have sold some bitcoins. Bitcoin miners are the ultimate bulls, who have a consistent position in one of the longest-leveraged, long bitcoin trades on the market. Miners may sell at times, but this is healthy and not a reason to panic.
This is a guest post by Zack Voell. Opinions expressed are entirely their own and do not necessarily reflect those of BTC Inc or Bitcoin Magazine.
I’m a journalist who specializes in investigative reporting and writing. I have written for the New York Times and other publications.