Miner reserves — unsold Bitcoin held in digital wallets associated with the companies — have dropped by 8,400 tokens since the start of 2024 to 1.8 million, a level last seen in June 2021, according to data compiled by CryptoQuant.Analysts said the decrease indicates miners are selling tokens.
“Miners have begun to sell more of their coins to bolster balance sheets and fund growth capex ahead of tougher times for margins when block rewards are halved in April,” said Matthew Sigel, head of digital-asset research at VanEck. “After the halving, scale will matter even more.”
The quadrennial halving cuts the quantity of Bitcoin that miners receive for operating power-hungry computers that secure the network by solving complex puzzles. Halving is key to capping the supply of Bitcoin at 21 million tokens. Rewards drop to 3.125 coins per block from 6.25 coins in the upcoming event.
The miner sales appear to be weighing on the Bitcoin price, which has struggled since the Jan. 10 approval of the first US exchange-traded funds to directly hold the digital asset. The token has shed about 6% to $43,000 in that period.
Since the ETF approvals, a net 3,617 Bitcoin have moved from miner wallets to exchanges, according to CryptoQuant. On Feb. 1, there was a net outflow of 13,542 tokens, the largest single-day efflux since December 2020.
“Miners seem to be selling their holdings of Bitcoin to finance the purchase of more efficient mining rigs,” crypto exchange Bitfinex wrote in a recent note. “The reduction in revenue could especially impact smaller mining operations, potentially pushing them out of business.”
While smaller mining companies with less access to the capital markets might be tapping their Bitcoin kitty, larger firms have been utilizing cash reserves and raising money by selling shares.
Marathon Digital Holdings Inc., the largest US miner, said it would sell Bitcoin from reserves in the past to cover operating expenses. But since curbing debt last year, the firm has been adding to its cash and Bitcoin positions.
“Marathon has approximately $1 billion of cash and Bitcoin on its balance sheet,” its Vice President of Corporate Communications Charlie Schumacher said. “That war chest, which includes 15,741 Bitcoin, provides us with the flexibility to do well if Bitcoin’s historical price cycles repeat, or to take advantage of consolidation opportunities if there is pressure on the industry.”
Bitcoin rebounded 157% last year, a bet on widening demand courtesy of the US spot ETFs as well as on the traditional view that halving is a prop for the token’s price. But the largest digital asset’s rally has sputtered in 2024.