Bitcoin (BTC) miners have boomed over the past year, sending a record amount of BTC to centralized exchanges to cover costs in 2023.
As Cointelegraph previously reported, it’s been an eventful year for the bitcoin mining ecosystem. The surge in BTC price and the hype around the BRC-20 token led the industry to record a whopping $184 million in transaction fees in the second quarter of 2023, surpassing the total fees for 2022.
Shares of major mining companies have also posted impressive gains in 2023, far outstripping bitcoin’s market cap performance. The top nine public bitcoin mining companies saw their market cap increase by 257% since the start of 2023.
Meanwhile, miners have also been forced to sell mined BTC to cover operating costs as the industry tries to ride out a prolonged bearish market. Miners Sent Record $128 Million Worth of Bitcoin to Trade in June 2023 Industry experts highlight the trend of miners sending BTC to trade to withdraw cash, cover costs and lock in profits.
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A market report from Bitfinex suggests that mining companies are willing to take a risk by moving BTC to exchanges. Analysts believe that miners engage in hedging activities in the derivatives market, executing over-the-counter orders, or moving funds through exchanges for other reasons.
Cointelegraph reached out to several major mining companies to uncover the current mining environment and recent industry trends.
Hut8 CEO Jaime Leverton highlighted the company’s efforts to complete the merger with USBTC have hindered its ability to raise capital through a market offering. Following the announcement of the impending merger, Leverton said that Hut8’s treasury strategy involves selling options from its bitcoin holdings and the newly created BTC to cover its operating expenses:
“We plan to review our treasury strategy once our merger is complete. Thus, we were the last major bitcoin miners to sell some of their production earlier this year.
Leverton said Hut8 still holds more than 9,100 BTC ($271 million) and the company remains “enthusiastic” about bitcoin and HODLing as it maintains one of the largest self-mined bitcoin reserves of any publicly traded company.
In its recently published production and operations update, Hut8 announced that it sold 217 bitcoin mines for $7.9 million in May and June.
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Charles Chong, senior manager of business development at Foundry, also weighed in on the subject, while the company declined to comment on whether it is interested in BTC in 2023.
As Chong explained, miners have historically seen 60-80% margins on production during bull market conditions when outside capital was abundant, allowing many operators to maintain their mining BTC.
“However, we are now in a different time with scarce external capital and only 15-30% margins, forcing miners to liquidate their bitcoin to cover operating costs.”
Chong also said that it is difficult to compare the current market conditions after the market boom in 2017 and 2021 with the subsequent bearish markets. He said that bitcoin mining goes in cycles because miners “overinvested” in ASIC mining equipment during good times.
It is worth noting that bitcoin mining difficulty has also recently hit an all-time high, indicating that the network is at its strongest. Chong pointed out that new, more efficient mining rigs with higher hashrate have been steadily brought to market in 2023, which has forced miners to refresh their fleets in order to continue producing BTC at a profit.
“That being said, overall network power consumption is also increasing, albeit at a slower rate, indicating increased investment in network security.”
A spokesperson for Brains Mining told Cointelegraph that the continued difficulty increase is a result of the hashrate increase, indicating that industry participants see the potential for further moves in BTC price:
“To us, this is a sign that miners are still able to deploy machines profitably in the current environment and is optimistic about further increases in the bitcoin price.”
Continued market conditions have also led to the closure of some major mining companies, including Core Scientific, which filed its Chapter 11 bankruptcy plan in June 2023. The company has already managed to raise significant capital to initiate the restructuring plan that has been set aside for September 2023.
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