Bitcoin Miners Sold More BTC than They Mined in July
[TL; DR]
The top public Bitcoin mining companies sold more BTC than they mined in July.
In total, the companies mined 3,478 BTC but sold 5,767.9 BTC.
In July the BTC hashrate increased by a smaller margin than the miners anticipated.
The depressed BTC price resulted in the mining companies generating less revenue than they expected.
Introduction
Cryptocurrency miners are long-term minded investors as they invest in expensive equipment which brings returns over a long period. The investment encomapsses installing equipment and setting up power supplies. Some of them enter into power supply contracts that last for years. However, the profit from mining bitcoin depends on its current price. Unfortunately sunk costs make up the greater part of their cost structures. As a consequence, most miners cannot easily alter their current cost structures. Yet still, they have to meet their financial obligations. What this means is that each mining firm has monthly bills to settle. This explains the major reason why these companies end up selling more BTC than they mine in the current month.
The recurring trend in the crypto mining sector is that the miners hold more BTC during the bull market and sell more during the bear ones. Hashrate Index’s recent report shows that bitcoin miners are digging deeper into their reserves to cater for their current operating costs and previously incurred expenses.
The majority of the public miners, Hashrate Index included in the report, mined and sold bitcoins in July. However, there are some major mining firms that did not submit their BTC mining and disposal reports for July. These include Greenidge and DMG Blockchain. The rest of the public BTC mining companies except Riot sold more BTC than they mined in July. Above this, two major public mining companies, HUT and Marathon, mined but did not sell any BTC during the month. The following graph gives the overall picture of the mining and sales outlook for these companies.
Source: Hashrateindex
These companies mined a total of 3,478 BTC yet sold 5,767.9 BTC. This means that most of these BTC mining firms sold more BTC than they mined. Take, for instance Bitfarms, it mined 500 BTC in July and sold 1 623 BTC during the same month. In a similar fashion, Argo mined 219 BTC and sold 887. Of note is Core Scientific, which mined 1, 121 and sold 1, 975. Therefore, it is the company that mined the largest quantity as well as sold the greatest amount.
Reason for public Miners to sell more BTC than they mined
There are several reasons why the miners sold more BTC than they mined in July. The major factor was the power curtailment and the demand response to the reduction in electricity generation as a result of the heatwaves in the United States. According to Hashrate Index, since the country experienced high temperatures grids were stressed from underproduction of energy assets and overdemand from AC use and other grid-stressing inputs; many industrial-scale miners powered down during these periods to stabilize the grid by piping electricity back to power providers.”
Also, since BTC prices were depressed, many miners dug into their reserves to meet their operating expenses and pay their creditors. The following graph shows the reserves of the major public mining companies between April and July.
Source: Hashrateindex
As you observe in The Graph, several of the mining companies experienced dwindling reserves except for Mara, Riot, Hunt, Hive and CLSK. Notably, CORZ witnessed the largest decrease in its reserves over the period.
The second reason for the companies to sell more BTC than they mined during the month was the low hashrate. Of course, the researcher attributed this to the reduction in electricity supply.
Source: Hashrateindex
Most of these companies had small increases in the hashrate. On the other hand, some of them experienced decreases in their hashrates. As such, their hashrate and the resultant output were less than they expected. This could have forced them to dig from their resources.
In addition some of these BTC mining companies sold more BTC than they mined to generate much funds needed to expand their production capacity. For example, some of the mining companies received “futures orders for the Antminer S19 XP and other S19 series rigs,” as they prepared to install new equipment. Some were also powering down their existing machinery. The other operational activities involved moving their machinery to new locations.
Firms that curtailed their Power credits
During July a few of these mining companies curtailed their credits and raked in much funds. In fact, Riot generated more revenue from the curtail activities than from selling BTC.
Specifically, Riot reported that it curtailed 11,717 mWh of power credits worth $9.5 million. The $9.5 million was worth about 439 BTC, if we use the average BTC price of $21,634 for July. You can view the summary in the graph below.
Source: Hashrateindex
As you noted, Riot generated $6, 900,000 from the sale of BTC and $9,500,000 from curtailing activities. However, it is not the only company which curtailed the power credits. The other companies are Argo and Core Scientific.
History of Public Mining Companies Selling more BTC than they mined
It is important to note that some of these public BTC mining companies sold more BTC than they mined in the past. Arcane Research presented the amount of BTC some of the companies sold, shown in the following graph.
Source: Arcaneresearch
The left side of the graph shows the amount of BTC the companies sold since January. However, on the right side there is the percentage of the mined BTC the companies sold. The statistics indicate that they sold more BTC than they mined in both May and June. As we know, these are the months in which the average price of BTC was very low. Definitely, the trend that started in May continued up to July.
Conclusion
According to the Hashrate Index report, most public bitcoin mining companies sold more BTC than they mined in July. The contributing factors include the depressed BTC price, the small rise in hashrate and the heatwave which affected electricity production in the United States. On the other hand, some of the companies required some funds to meet the costs of installing new equipment, relocation and paying other operating expenses.
