Bitcoin Miners Liquidate Reserves Amid Post-Halving Revenue Squeeze

Bitcoin miners have begun liquidating their coin reserves after nearly two months of reduced revenue following the network's fourth halving event. A recent report from CryptoQuant, a crypto market intelligence firm, highlighted that miners have been offloading their BTC to exchanges at an unprecedented rate, peaking at 3,000 BTC (around $207 million) on June 9.

This sell-off triggered a 3% dip in Bitcoin's price to $66,000 on Tuesday, although the cryptocurrency quickly bounced back the following morning.

“Miner selling via [over-the-counter] desks has also spiked to the largest daily volume since late March,” the report noted. On Monday, miners sold 1,200 BTC for approximately $83 million over the counter, marking their highest daily sales since a 1,600 BTC sell-off in late March. These figures from CryptoQuant are derived from transactions involving Bitcoin mining pools, where major mining firms often participate to stabilize their revenue streams.

Several factors are driving these sales. The gradual increase in Bitcoin's price since April has prompted mining firms to capitalize on potential profits. However, the substantial challenges facing miners cannot be ignored. The halving event in April reduced the fixed BTC block reward by 50% to 3.125 BTC, coupled with relatively low network fees, leading to a significant revenue drop for the industry.

Experts suggest that while large competitors with efficient economies of scale may navigate this transition successfully, even some publicly traded miners are feeling the pinch. For instance, Marathon Digital (MARA) sold 1,400 BTC in June, representing 8% of their total reserves before the sale, a sharp increase from the 390 BTC sold throughout May.

CryptoQuant's data revealed that Bitcoin miners were “extremely underpaid” in May, only returning to being “fairly paid” in June. This assessment is based on comparing the 30-day percentage change in the U.S. dollar value of the block reward to the 30-day percentage change in mining difficulty. The report indicated that miners are still underpaid as the block reward has decreased more than the mining difficulty.

Despite these challenges, Bitcoin’s total hash rate has only seen a slight decline of 4% since the halving, indicating that mining remains nearly as difficult and costly as before, despite the reduced rewards.

Interestingly, despite these hurdles, many mining stocks have performed well post-halving. The Valkyrie Bitcoin Miner ETF (WGMI), for example, has surged by 33% since the event.