The end of long-term ownership of mining companies in “winter of crypto assets” | coindesk JAPAN | Coindesk Japan


Since the bull market, Hut 8 Mining, which has taken a long-term holding strategy, finally changed its strategy on March 7th and invested 188 bitcoins in February to use as daily working capital. BTC) has been sold. The company was the last fully owned mining company to go public.

Amid sluggish financial markets and declining profitability, mining companies are struggling to raise working capital. Between the last bull market and the current bear market, many mining companies that chose to hold all of their mined bitcoin have started selling bitcoin for day-to-day working capital.

Hat Eight has not sold Bitcoin since January 2021. The sale in February brought the holdings to 9242 BTC at the end of February. Marathon Digital Holdings also sold bitcoin in January. As of the end of February, the holding amount is 11,392 BTC.

Hat Eight CEO Jaime Leverton previously said he would sell bitcoin to complete a merger with US Bitcoin Corp.

a matter of time

Considering issues like rate hikes, “it was only a matter of time before these companies needed to be a little more cautious with their cash on hand,” said investment firm DA Davidson, who led the bitcoin mining industry. analyst Chris Brendler said.

“At the peak of the market, bitcoin mining companies were actively supporting their business and growth by issuing equity, and the market supported that,” said Keri Langrice, chief strategy officer at bitcoin mining firm TeraWulf. (Kerri Langlais) said.

According to Marathon Digital spokesman Charlie Schumacher, the mining companies that have held bitcoin have seen investors welcome their ballooning balance sheets and the bitcoin community holding bitcoin for the long term. was evaluated by both.

prolonged bear market

However, during the bear market, bitcoin prices and mining companies’ share prices fell, making bitcoin holdings a negative factor for shareholders. Investors are finally rejecting the strategy of holding bitcoin for the long term and working capital with stocks, Langrice explained.

The prolonged bear market has bankrupted major mining companies such as Compute North and Core Scientific, and has led some to pay off their debts to keep their businesses running.

“Debt-ridden bitcoin mining companies filing for bankruptcy protection and consolidating their debts” were one of the factors that contributed to the decision to sell bitcoin, according to cryptocurrency mining research and data firm TheMinerMag. Head of research Wolfie Zhao analyzes.

Tim Rainey, treasurer of bitcoin mining firm Greenwich Generation, said the trend is likely due to “lower hash prices (mining profitability)” and “business growth in a bear market.” It was likely triggered by the need for liquidity to meet other debt obligations.”

It was in June 2022 that Bitcoin sales became particularly common. According to Zhao’s analysis, miners sold 14,200 BTC this month. About half of that came from the bankrupt Core Scientific. Since then, the mining companies Zhao is investigating have sold between 5,000 and 7,000 BTC per month. That’s more than double the average January-May 2022 sales volume.

sale timing

There were indications that the mining company would have to sell its bitcoin holdings, but timing was critical to maximizing its profits.

In June 2022, Core Scientific began selling its huge Bitcoin holdings. It was around the time that the Bitcoin price began to fall from around $40,000. Zhao said he could have made $144 million more (about $19 billion) in profits had he started selling in January, rather than waiting for the start of the market downturn in May.

While many mining companies and investors were forced to sell bitcoin last year, they wanted to make it clear that it was a “conscious choice for financial management and business building,” Marathon Digital’s Schumacher said. rice field.

It wasn’t until January this year that the company began selling bitcoin for working capital.

Impairment loss

Greenwich Generation’s Rainey expects mining companies to report “substantial non-cash impairment losses on both mining-related assets, including mining equipment and infrastructure, and digital assets held” in future earnings calls. there is

Industry giant Riot Platforms will post $147.4 million in crypto asset impairment losses in 2022. The year before, it was $36.5 million. Hut Eight also posted a mining equipment loss of $113.9 million in 2022. The price of mining equipment largely reflects the price of crypto assets.

Zhao believes more miners will “continue with a hybrid strategy until the bull market returns.” “But if that happens, will we go back to a strategy of 100% ownership and do the same thing all over again?” he asked.

|Translation and editing: Akiko Yamaguchi, Takayuki Masuda
|Image: DALL-E/CoinDesk
|Original: Crypto Winter Ends Era of Bitcoin Mining ‘HODLers’

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