Crypto mining companies have been increasing their asset liquidation, with top firms like Marathon Digital (NASDAQ:) and Bit Digital selling more bitcoins in October than they produced, a strategy influenced by the recent surge in ‘s price and the anticipation of the next Bitcoin halving event slated for April 2024.
In October 2023, Bitcoin experienced a notable rally, reaching an 18-month high of $35,000. This price surge prompted mining companies to sell a significant number of bitcoins. Collectively, these firms sold 5,492 BTC, which was valued at approximately $164 million. The liquidation-to-production ratio for the industry reached 105%, indicating that not only were all newly mined coins sold, but also additional holdings were liquidated.
The trend of increased liquidation was not isolated to October. In June 2022, during the onset of the bear market, the liquidation-to-production ratio spiked to a record 360%. However, by August of that year, this ratio had decreased to 80%. Despite this reduction, the ratio remained elevated compared to earlier months, such as July (64%), August (77%), and September (77%) of 2023.
Several companies stood out in their liquidation efforts. Bit Digital and Hut 8 each sold over 300% of their monthly production in October. These sales are part of a broader strategy adopted by firms like Marathon, Hut 8, Cipher, and CleanSpark (NASDAQ:). This hybrid treasury approach involves selling assets to capitalize on market rallies, replenish cash reserves, and prepare for future events that could affect their operations.
One such event is the upcoming Bitcoin halving in April 2024. Halving events reduce block rewards for miners by half and occur every 210,000 blocks until all 21 million BTC are mined. The previous halving in May 2020 cut the block reward from 12.5 BTC to 6.25 BTC. The next halving will further slash rewards to 3.125 BTC per block, significantly impacting miners’ profitability and prompting them to increase their cash reserves in anticipation.
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