Bitcoin miners selling coins is sign of a radical change

Miners have sold their coins in a possible sign that a shakeout of less-efficient operators is coming

Riot Blockchain's Whinstone bitcoin mining facility in Rockdale, Texas, US. It is one of the bigger miners rebounding off the lows from the recent sell-off. EPA

Some Bitcoin miners are trading in their diamond hands to pay for their picks and shovels.

A metric tracking Bitcoin miners’ holdings turned negative on February 5 for the first time since mid-November, according to crypto analytics platform Glassnode. The turn in the metric — or the net change of miner balances over a trailing 30-day window — shows that miners have sold their coins, in a possible sign a shakeout of less-efficient operators is coming.

Miners had been adding to their stockpiles for months, even as prices fell to $35,000, according to research firm Delphi Digital. But with Bitcoin still lingering 35 per cent below an all-high in November, miners with costly operations are under pressure to mind their cash balances, while also investing in more powerful equipment.

Shares of the bigger miners are rebounding off the lows from the recent sell-off. Marathon Digital Holdings, Riot Blockchain, Stronghold Digital Mining and Hut 8 Mining are up more than 40 per cent from lows in January. But those with smaller operations could be selling strategically.

Marathon and Hut 8 told Bloomberg they remained “hodlers” during the recent crunch. “We started hodling in October 2020, and since then, we have not sold a single satoshi”, Charlie Schumacher, a spokesman for Marathon Digital, said. A satoshi — derived from supposed Bitcoin creator Satoshi Nakamoto’s name — refers to a percentage of a coin.

Likewise, Sue Ennis, head of investor relations for Hut 8 Mining, said: “We are believers in Bitcoin. Some miners sell Bitcoin or use it to pay expenses. We hold or ‘hodl’ ours”. [Hodl is a term derived from a misspelling of 'hold', in the context of buying and holding Bitcoin and other cryptocurrencies, and it also now commonly stands for 'hold on for dear life' among crypto investors].

Riot and Stronghold did not respond to emailed inquiries.

Bitcoin miners have pledged to grow, committing to buy more mining rigs and raise the rate at which they can mint Bitcoins. But given how both equity and crypto markets are behaving, there’s “little margin for error” in terms of execution this year relative to 2021, Lucas Pipes, a B Riley analyst, said.