06/28/2023 0 Comments

1. Bitcoin Price Watch: Miners Send Massive Amounts of BTC to Exchanges

In the recent past, a record-setting surge in Bitcoin miner revenue directed to centralized crypto exchanges has become an intriguing trend to monitor. On June 27th, a renowned on-chain analytics company, Glassnode, tweeted that Bitcoin miners were driving a significant increase in revenue directed towards exchanges.

Increased Interaction with Centralized Crypto Exchanges

Currently, Bitcoin miners are engaged in “extraordinarily high” exchange interactions, demonstrating a marked shift in their activities. According to Glassnode, a staggering $128 million was dispatched to exchanges by Bitcoin miners within just the past week. The figure represents a whopping 315% of their daily income, pointing towards a noteworthy change in Bitcoin miner behavior.

During the memorable 2021 bull run, multiple spikes in miner revenue dispatched to exchanges were noted, primarily as profit-taking maneuvers by the miners. Moreover, an intense inflow of capitulation was observed in late 2022 as markets reached their cyclical low.

Despite the previous peaks, the most recent surge is unparalleled, exceeding all others by a significant margin.

Anticipating Cash Outs and Profits

Typically, Bitcoin miners transfer BTC profits to exchanges in anticipation of cashing out to manage operational expenses and secure profits. Over the past week, such a move appeared quite strategic since BTC touched its yearly high price at $31,185 on June 24th.

During this period, Ki Young Ju, the co-founder and CEO of CryptoQuant, seconded this notion by stating that the prevailing price-to-earnings ratio presented an “appealing price for miners to sell.”

Surprisingly, these massive mining revenue transfers have yet to impact Bitcoin prices, which continue to hover slightly above the crucial $30,000 mark at the time of writing.

Nevertheless, the existing $31,000 price bracket is perceived as a significant resistance level for BTC, which markets failed to surpass in mid-April and late June. If bullish trends fail to gain momentum, anticipated future losses, particularly in the case of miners’ liquidation, could ensue.

Fluctuations in Bitcoin Mining Profitability

Regarding Bitcoin mining profitability, known as the hash price, a marginal increase over the last week has been observed, attributed to the concurrent rise in BTC prices. The current rate is $0.076 TH/s (terahashes per second) daily.

Despite a year-to-date Bitcoin price increase of more than 88%, miners are grappling with several challenges. Profits have taken a nosedive by more than 30% since July of the previous year and a staggering 80% decline since the apex of the 2021 bull market.

Current Obstacles for Bitcoin Miners

When viewed in conjunction with near-record hash rates of 377 EH/s and peak difficulty levels, it is evident that Bitcoin miners are confronting a steep uphill journey.

The combined factors of rising hash rates, difficulty, and increasing energy prices create a downward spiral in mining profitability. This scenario suggests that liquidating their painstakingly mined Bitcoin might be a bitter but necessary step to meet escalating costs.

2. Coinbase Offers $50 Million Loan to Crypto Miner Hut 8 in Preparations for 2024 ‘Halving’

Coinbase has offered to lend $50 million to Hut 8, one of the world’s largest publicly traded Bitcoin (BTC) mining firms, the latter firm said in a press release.

The $50 million credit facility offered to Hut 8 is split into several installments, with $15 million set to be paid out shortly after the deal closes, $20 million between one and two months following closing, and another $15 million after a previously announced merger between Hut 8 and U.S. Data Mining Group, Inc. has been completed.

The deal with Coinbase comes in the run-up to the next Bitcoin halving, which is expected to take place in April 2024.

During the halving, the reward paid out to Bitcoin miners will be cut in half, from 6.25 BTC per block currently, to 3.125 BTC.

Secured by Bitcoin held in Coinbase custody

According to Hut 8’s press release, the proceeds from the loan will be used for “general corporate purpose.”

The credit facility will mature 364 days after the first borrowing, the firm further said.

It added that obligations are secured by Hut 8’s interest in Bitcoin held by Coinbase’s professional custody arm, and said the credit facility will be subject to a specified loan-to-value (LTV) ratio.

“This credit facility gives us additional financial flexibility,” Jaime Leverton, CEO of Hut 8, said in a media statement.

“At the same time, it ensures that we can maintain our dynamic Bitcoin treasury management strategy going into the halving,” he added.

Bitcoin hodler

Hut 8 is one of just a few large-scale Bitcoin miners what follow a “hodl” strategy, which essentially means that it chooses to keep as many of the BTC it mines as possible on its balance sheet rather than selling for fiat.

While great during Bitcoin bull markets, the “hodl” strategy inevitably puts firms like Hut 8 in difficult positions during prolonged market downturns, a likely reason why the firm has now taken the $50 million loan from Coinbase.

Shares of Hut 8, a Toronto-based company that is listed in both Canada and the US, have more than 200% since the beginning of the year, fueled by improved sentiment in the spot Bitcoin market.

3. Texas Bitcoin Miners Scale Back Operations Amidst Heat Wave

Bitcoin (BTC) miners in Texas have halted operations after a heat wave and subsequent surge in elcetricity price put the state’s power grid under pressure.

Crypto miners in the region as well as grid manager the Electric Reliability Council of Texas, or Ercot, have confirmed the pause in mining operations, according to a report form Bloomberg.

“Prices were elevated and the nature of the incentive programs available to all Ercot citizens, not just Bitcoin miners, resulted in most or all large flexible loads being off,” a spokesperson for the Texas Blockchain Council said.

The report claimed that Texas was close to a power crisis last week after demand continued to rise while available supplies dipped. At one point, spare electricity supplies shrank to just 2% of overall capacity.

“It appears most crypto sites appeared to have dropped virtually all their load,” Ercot spokesperson Christy Penders said.

The pause in mining operations in Texas comes as the state has been struggling with an unrelenting heat wave for the past two weeks, which has also put unprecedented pressure on the power grid.

A recent report from the AP states that the Texas grid is currently on an elevated “weather watch,” which doesn’t require residents to reduce their power usage but suggests that it may become necessary in the future.

Despite criticism of Texas’ grid management, experts believe that power outages are unlikely this summer and that winter poses greater risks.

However, with temperatures soaring above 110 degrees (43 degrees Celsius) in some areas of Texas, air conditioners are running at full blast and officials are advising homeowners to be mindful of their electricity consumption.

“Please, please do what you can to conserve energy,” said Stuart Reilly, interim general manager of Austin Energy, which serves more than a half-million customers in Texas’ capital.

Crypto Miners Across the World Struggle as Prices Drop

It is worth noting that miners across the globe have been struggling to make ends meet with the plunge in Bitcoin prices on top of higher electricity costs.

In December last year, Core Scientific, the largest public Bitcoin miner by computing power, filed for bankruptcy.

At the time, the company attributed its bankruptcy to a $7 million unpaid debt from Celsius Network, a bankrupt cryptocurrency lending company, besides slumping crypto prices and rising energy costs for mining.

Aside from Core Scientific, other crypto mining firms are also struggling amid the market downturn.

Argo Blockchain, Iris Energy, and Greenidge Generation are among the more notable Bitcoin mining companies that are facing financial issues.

In another blow to the crypto mining industry, as Venezuela’s halt on crypto mining approaches its third month, more miners are forced to sell their rigs and shut down permanently.

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Harvey CHEN

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