Erik Weijers, 2 years ago
One of the market developments of 2021 is that North American Bitcoin miners no longer sell their Bitcoin. Instead, they are holding on to the Bitcoin they mine. Hut 8 mining came out with a statement in early December explaining this strategy. As of November 30, the Canadian company has over 5,200 Bitcoin on its books.
This new financial strategy is also adopted by Riot Blockchain, Marathon Digital and HIVE Blockchain Technologies. The trend shows that Bitcoin miners are increasingly moving away from the business model of for example oil producers, who continuously sell their supply. These miners are thus making the transition from pure production companies to hodlers.
To be sure, it has always been the case that miners held onto their Bitcoin during certain phases of the market. When prices picked up, they sold. Of course, miners can still do that should the need arise. But the current trend shows that miners increasingly see Bitcoin as a strategic investment that can pay off in the long run.
How do these miners pay their operational costs? They are helped by financial tools that are now also available in the crypto world. One is yield. Hut 8, for example, reveals that it is earning yield on about 40% of its Bitcoin treasury. Interest rates on Bitcoin fluctuate and vary depending on the provider. But at an interest rate of 4%, it would earn Hut 8 80 Bitcoin per year: at the current rate, about $4 million. No doubt not enough to pay their energy bills but a decent side hustle. Another means is to borrow with Bitcoin as collateral. Marathon Digital announced in October that it had secured a 100 million revolving credit loan from Silvergate, a traditional bank.
The North American companies mentioned above are each mining about 200 Bitcoin per month - with Riot topping the list with over 400. All companies have benefited significantly from the exodus of miners from China in the spring of 2021. In doing so, they obtained, at least temporarily, a substantially larger share of the total hashrate.
Although the amount of Bitcoin that "comes out of the ground" carries less weight today than it used to, the fact that miners are not selling can still have a price effect. The CEO of Marathon informed Blockworks in October, "By miners holding bitcoin and not liquidating, it creates a liquidity crunch in the marketplace, which goes to help the price of bitcoin. Not that miners are collaborating on this in any way, but I think all miners believe that the price of bitcoin will go up, and by not selling bitcoin, we essentially cause the price to go up somewhat."
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