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Following the Bitcoin halving event, a distinct trend has been observed within the mining sector: smaller miners are liquidating their Bitcoin assets, whereas larger, publicly listed mining firms are increasing their Bitcoin holdings, as noted by Julio Moreno, head of research at CryptoQuant.
Since the #Bitcoin halving, smaller miners are the ones selling; larger miners have accumulated.
This aligns with reports from major publicly-traded mining companies: increased reserves and some even purchasing Bitcoin. pic.twitter.com/E3j7IrcaVU
— Julio Moreno (@jjcmoreno) July 30, 2024
This transition illustrates the varying strategies and financial strengths between small and large miners in the wake of the halving.
The Bitcoin halving, an event that takes place roughly every four years, halves the reward for mining new blocks. The latest halving occurred on April 19, reducing miners’ rewards from 6.25 BTC to 3.125 BTC. This decrease in rewards heightens the operational strain on miners, particularly impacting those with less efficient operations or elevated costs.
Bitcoin mining has become increasingly cost-prohibitive since the halving, with the asset’s “hashprice” reaching its lowest levels in the past two months, according to data from Hashrate Index.
Smaller Miners Under Pressure to Sell
Smaller miners, typically operating with narrower profit margins and less sophisticated mining equipment, are experiencing heightened financial pressure following the halving.
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The diminished income from mining necessitates that they sell their Bitcoin to manage operational expenses and sustain their viability. This requirement to liquidate holdings renders them more susceptible to market volatility and operational difficulties.
Conversely, larger, publicly traded mining companies have shown an ability to not only sustain but also expand their Bitcoin reserves. Reports from significant industry players indicate that these companies are strategically acquiring Bitcoin.
Some have even taken further steps by purchasing additional Bitcoin from the market to enhance their reserves. This strategy is facilitated by greater access to capital, more efficient mining operations, and often reduced electricity costs due to bulk agreements or ownership of renewable energy sources.
Marathon, Riot Considered Large Mining Firms
Major mining firms, including Marathon Digital Holdings and Riot Platform, have reported increased reserves, consistent with their strategy to retain Bitcoin as a long-term investment, anticipating future price rises.
Their financial strength enables them to endure the reduced mining rewards and strategically position themselves for upcoming market conditions.
With smaller miners continuing to sell and larger miners accumulating, this trend is likely to impact market supply dynamics and the competitive landscape of the Bitcoin mining sector.
Earlier this month, Marathon Digital announced the acquisition of $100 million worth of Bitcoin in the open market. The company stated it would reassess its “HODL” strategy and commit to retaining all mined Bitcoin on its balance sheet.
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