Public Miners Start Selling Bitcoin Treasuries

As June’s monthly production updates roll out next week, Core Scientific and Bitfarms have both sold nearly 50% or more of their bitcoin treasuries.

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Core Scientific sells 7,202 BTC

On July 5, 2022, Core Scientific, the third publicly traded bitcoin miner in the world by market capitalization ($525.52 million) announced in its June monthly update the sale of 78.6% of its holdings in bitcoins.

“During the month of June, the company sold 7,202 bitcoins at an average price of approximately $23,000 per bitcoin for total proceeds of approximately $167 million. As of June 30, 2022, the Company held 1,959 bitcoins and approximately $132 million in cash on its balance sheet.

“Proceeds from bitcoin sales in June were primarily used for ASIC server payments, capital investment in additional data center capacity, and scheduled debt repayment. The company will continue to sell self-mined bitcoin to pay operating expenses, fund growth, repay debt and maintain liquidity.

Last week, in our latest mining issue, we covered some of the dynamics of the bitcoin mining cycle and the hash price bull and bear market.

Given that the hash rate is only 5.43% below its all-time high, further pressure on mining operations seems to be on the horizon. Previous periods of bear market miner capitulation have seen hash rate declines of more than 25% from previous highs, with 52.22% after the Chinese miner ban being the biggest drop in history bitcoin.

Bitcoin mining hash rate reduced from all-time high

While relative hash rate growth has declined significantly in recent years, absolute industry growth has been tremendous, especially in the publicly traded sector.

Share of public bitcoin miners in hash rate

The recent boom in the mining industry and its synergy with the public markets over the past two years has given it ample access to debt financing that was unavailable in previous cycles. This allowed miners to increase stock market valuations by borrowing against their holdings to fund operations and additional capital expenditures.

This dynamic has led mining operations to be underwater on months of bitcoin mining revenue while having to fund electricity deals and unpaid debts. Although this is a broad breed of industry, it is the reason why the equity of these miners relative to bitcoin has performed so poorly.

What triggers a recovery in public minors?

When you invest in bitcoin mining companies or infrastructure, you are investing for the next bull market in hash prices – the “gold rush” phase of the bitcoin market cycle. Below is the hash price (in logarithmic scale) with the lower panel showing its rise from previous all-time lows.

As a reminder, the hash price is defined as the daily revenue of miners divided by the hash rate.

Hash price percentage from market cycle lows

Given the vicious competitive nature of mining and the recent rebound in hash rates to 218 EH/s, more headwinds are looming on the horizon for the sector – which could put even more pressure on the BTC/USD exchange rate, further reinforcing the compression of margins in the mining sector.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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