Bitcoin Miners Are Selling Tokens as Prices Linger Near Lows

(Bloomberg) — Bitcoin miners are beginning to sell tokens they’ve hoarded to cover burgeoning costs with the prospects for industry growth slowing and the price of the largest cryptocurrency showing few signs of rebounding following the recent collapse from record highs.

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Miners transferred about 195,663 coins to exchanges in May, the biggest monthly increase since January, according to data from Coin Metrics compiled by Compass Mining. Based on Bitcoin’s average price of around $32,000 in May, the total value of the tokens was about $6.3 billion.

That indicates companies may be moving large amounts of coins stored in their digital wallets to exchanges for sale. To be clear, the number does not necessarily mean miners are selling that many tokens since some miners would put their coins in exchanges for other transactions and not sell.

Sellers include publicly traded miners such as Riot Blockchain Inc. that had been stockpiling Bitcoin on a bet that prices would keep appreciating. They had served as a proxy for equity investors that wanted to gain crypto exposure without actually owning the tokens. Smaller miners who face large liquidations are also selling their Bitcoin. The token has dropped about 35% this year.

“I think miners are just talking about the macro environment and think it is probably prudent to sell Bitcoin in these levels in order to keep the operations safe,” said Will Foxley, director of content at mining hardware marketplace and hosting services provider Compass Mining.

More large-scale public miners have become cash-strapped as it became harder to raise capital through debt or stock sales during a recent bear market. They’re also seeking wider profit margins as the companies expand. Riot is building a mining facility with one gigawatt capacity in Texas after it has completed its 750-megawatt site, which is one of the largest mining farms in the US.

Miners are also trying to pay for mining machines they ordered months ago while putting down non-refundable deposits in millions of dollars.

A wave of small miners that came in during the bull cycle and bet big on Bitcoin prices rising are now at risk of needing to liquidate their mined coins, said Matthew Schultz, executive chairman of crypto-mining company CleanSpark.

Cathedra Bitcoin Inc., a small-scale miner, had to sell almost all their holdings to maintain their mining operation.

“We have spent the last several weeks restructuring our balance sheet and operations to ensure Cathedra is well positioned to endure a prolonged economic downturn,” Cathedra Chief Executive Officer AJ Scalia said in a statement.

The flow data tracking transactions between miners and exchanges is one of the best proxies for sales of mined coins, but it has limitations. While the data includes digital wallets from major exchanges such as Binance and Gemini, it doesn’t have data from Coinbase due to the biggest US exchange’s wallet design. Some of the miners also opt to liquidate their crypto holdings through over-the-counter trading desks, whose trading data is typically not public, Foxley said.

Shares of public miners have been hit hard this year. Riot is down 72% since December, while Marathon Digital Holdings Inc. has slumped a similar amount.