The Age of Crypto Miner HODLing May Be Over

Crypto miners during the bull run touted their HODL strategies. Now, many are opting to sell. 

The days of extreme bitcoin hoarding could be over, according to industry participants. At least for now. 

For the many miners that had historically stashed bitcoins and waited for the price to go up, their success was greatly exposed to the asset’s upside and downside, according to Louise Abbott, a crypto-focused partner at Keystone Law.

“Most will want to hold onto what they can afford to keep their valuation high for shareholders, but others will need to sell to survive the new economic crypto world we are now in,” she told Blockworks. 

That new economic world includes bitcoin mining that is not as profitable as it once was due to higher operational costs and energy prices, as well as a potential looming global recession. 

“The triple effect of ramping network difficulty, fiat price bear market, and a global energy crisis in 2022 combined to make conditions tougher for miners than they have been for a long time,” said Andy Long, CEO of crypto mining firm White Rock Management. “Miners with excess leverage could not sustain their interest payments.”

Nishant Sharma, founder of bitcoin mining research and consulting firm BlocksBridge, noted that many miners took on an “unhealthy amount of debt” to buy more machines with “unbelievably long lead times” as they continued to hold mined bitcoins in the bull market of 2021.

“This not only diluted their shares but also left a large number of them with unpayable debt, a large number of bitcoins purchased at a very high premium, and new machines without the ability to energize those machines after the bull cycle had ended,” he explained. 

While miners previously might have looked to secure loans instead of selling bitcoin, opportunities to raise capital in the debt or equity markets have become more rare. 

“Miners don’t want to sell at a price below the cost of production, but sitting on large stashes of bitcoin gives miners the option to sell in times of need,” Abbott explained. “I believe we will see a lot more of this.”

Who’s selling and how much?

Riot Platforms too sold 600 of the 639 bitcoins it mined last month, generating net proceeds of approximately $17.6 million. 

The Texas-focused miner started selling a portion of its monthly bitcoin production in March 2022. Its April 2023 bitcoin sale trended lower than some of the last few months, as it sold 700 bitcoins in January, 600 BTC in February and 675 bitcoins in March.

“Currently Riot’s strategy is to sell most of its monthly Bitcoin production to fund its operating expenses and expansion initiatives,” a Riot spokesperson said in an email. “This practice has enabled the company to uphold a debt-free balance sheet that includes approximately 7,112 unencumbered bitcoin, thereby strengthening its market leading position.”

Marathon Digital also chose to sell 600 bitcoins of its 702 BTC self-mining total during the month. 

It had sold 1,500 BTC in January — the first time it had ever done so — before choosing to part with 650 BTC and 750 bitcoins in February and March, respectively.

Marathon’s Fred Thiel told Blockworks in March that the company would sell bitcoin to cover operating costs “for this year and going forward.”

“We’ll look to HODL the rest, and so over time our bitcoin pile should continue to grow,” he added at the time. “And, as we need capital for growth initiatives, we’ll leverage the capital markets for that.”

This bitcoin liquidation slowdown last month by both Marathon and Riot was mirrored by some of the other largest public miners.    

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CleanSpark’s sale of 407 bitcoins in April, for example, came after it sold 502 BTC the month before, according to Cipher Mining’s bitcoin sold went down from 450 to 406 BTC from March to April, while Bitfarms BTC sold dropped from 394 to 349 in that month-to-month span. 

Sue Ennis, Hut 8 Mining’s vice president of corporate development, told Blockworks in July 2022 that the company would most likely only consider selling from its bitcoin stack if the asset’s price jumped above its all-time highs, 

That plan changed upon the company revealing its merger with US Bitcoin Corp. in February. Hut 8 CEO Jaime Leverton said in a statement at the time that the transaction would allow the miner to ”leverage the significant, unencumbered bitcoin stack we have HODLed to date.”

Like Marathon, Hut 8 began selling BTC this year, opting to offload 240 bitcoin in March and 188 BTC in February.

While Vancouver-based Hive Blockchain Technologies has not yet reported operational details for April, it sold all of the bitcoin earned from its GPU mining hashrate payouts in March.

Miners to HODL once again

The era of miners flexing a HODL strategy is not over, White Rock Management’s Long told Blockworks. Rather, that approach is “merely resting,” he added. 

“The nature of the market is cyclical and in low hash price periods, many miners have to dip into reserves to either cover operating expenses or invest in new facilities or hardware,” Long said. “When the bull market accelerates, likely slowly at first and rapidly some months after the [bitcoin halving], then we will see many miners maximizing their HODL again.”

Bitcoin’s price stood at nearly $28,600 at 1:30 pm ET — up about 72% year to date, but down nearly 3% from five days ago.  

“If the price starts rallying again like in the last bull cycle,” Sharma agreed, “we may see the [HODL] trend return sooner or later depending on the hashrate, and thus the network difficulty, at that time.”

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