Hut 8 Mining was the last bitcoin miner publicly listed to have a 100% “HODL” strategy since the bull market began. The firm announced last week that it was forced to sell off 188 bitcoins in order to continue to fund its operations.
Due to a decline in the financial market and shrinking margins, miners have had difficulty in raising funds for their operations. Some miners who chose to keep their bitcoin during the last bull market, and into the latest bear cycle, are now selling the coins to fund their daily operations expenses.
Hut 8 had not sold any of its bitcoin since January of 2021. It was left with 9,242 BTC at February’s end, after the sale. Marathon Digital Holdings sold some of its bitcoin balance for the first time ever in January after indicating that it would. Marathon had 11,392 BTC remaining at the end of February.
Jaime Leverton, chief executive officer of Hut 8, previously stated that the company would sell Bitcoin in order to merge with the United States Bitcoin Corporation. “It was only a matter of time before these companies needed to be a little more careful with their cash on hand,” stated Chris Brendler, a D.A. Davidson analyst.
It can be costly to hold onto the bitcoin that is produced via mining. Some mining companies were forced to sell the bitcoins they had mined in order to finance their operations as other financing options became scarcer and scarcer.
“When the market was at its peak, public bitcoin miners were aggressively funding operations of existing assets and growth capital with equity issuances, which the market supported (or overlooked),” stated Kerri Langlais, a strategy officer at TeraWulf.
Charlie Schumacher, a spokesperson for Marathon Digital, said that miners who kept their bitcoin were earning “brownie points” from both investors who liked seeing a healthy balance sheet, and the bitcoin community as a whole.
Langlais stated that bitcoin holdings caused a “tremendous dilution” of shareholders during the bear markets, as both the price of bitcoin and mining stocks fell. She said that investors stopped supporting company strategies of holding bitcoin while financing operational losses with equity.
During the bear market, several large-scale miners suffered from long-term financial difficulties and were forced to file for bankruptcy. These included Compute North as well as Core Scientific. Other miners turned to debt restructuring in order to continue their operations.
Wolfie Zhao, research head at TheMinerMag said, “The example of debt-laden bitcoin miners going through bankruptcy protection or debt restructuring” added to the decision to sell off some bitcoin reserves.
Tim Rainey, treasurer at Greenidge Generation, stated that the selling trend was likely started by “the decrease in hash price [mining profitability]” as well as “the need for liquidity during the bear market to fund operations and other obligations.”
According to the analysis provided by Zhao, June 2022 was a strong month for bitcoin liquidation. During that month, miners sold off 14,200 bitcoins. About half of this was sold by Core Scientific, a firm that is now bankrupt. Miners tracked by Zhao since that time and they have sold between 5,000 and 7,000 bitcoins monthly, which is more than twice the amount they sold between January 2022 to May 2022.
Core Scientific began selling its BTC holdings in June 2022 when bitcoin’s price began falling from the $40,000 range. Zhao claims that the mining firm could have earned $144 million more had it started selling its holdings in January instead of waiting until May when the market started to crash.
Many investors and bitcoin miners were forced to sell at least some of their BTC last year. But Marathon wanted to make sure that the world knew that when it began selling its bitcoin holdings, it was making a conscious decision that was related to treasury management.
Zhao predicts that more miners will “stick to a hybrid strategy until maybe whenever the bull returns. But then the question is will they become 100% holders and repeat the same again?”