Bitcoin miners stop “HODLing”, start selling as cryptocurrency and energy costs increase

Cryptocurrency is doing so badly right now that even some of the typical “HODLers” are selling.

Bitcoin miners have been unloading their Bitcoin holdings for the past two months as cryptocurrency markets plummet and Bitcoin declines in value, according to a new report from Reuters.

In an unusual trend throughout May, Bitcoin miners actually sold more Bitcoin than they obtained through mining, according to the digital asset analysis firm Arcane Research. By comparison, last month miners sold only about 20 percent of Bitcoin that they were able to extract, and the rest of their rewards were usually kept in the hope of higher profits as Bitcoin’s value rose.

But as crypto has refueled In recent months, things have changed gone in a other directionand forces some Bitcoin miners to sell down their holdings if they do not want to close down.

Bitcoin mining maintains the digital ledger of the cryptocurrency, known as the blockchain, by validating transactions inside a block and adding it to the chain. The process of validating the transaction has often been explained as computers solving advanced mathematical equations, but it is really more like complicated guessing. When a block is added, miners are rewarded with Bitcoins.

While Bitcoin mining has been very profitable in recent times, with a single Bitcoin trade in between-to-high-five numbers, the experiment may not be so lucrative now.

The mining process requires a lot of powerful (and expensive) computing power patterned to be the first to validate a given block of transactions. The process also becomes more complex, and in turn more costly, as time goes on.

And competition grew as the cryptocurrency reached all-time highs over the past year, meaning that more and more machine power would be needed for miners to continue earning Bitcoin. All this uses an incredible amount of energy. Bitcoin miners use more power than the countries of Kazakhstan and the Philippines, according to Cambridge Bitcoin’s power consumption index. With rising energy costs, profits from Bitcoin mining are declining.

Aside from energy and competition, Bitcoin mining is unlikely to become more lucrative. The reward for validating a block on the blockchain is halved after every 210,000 blocks that are mined. This happens about every four years. In about a year and a half, this reward will be cut from 6.5 Bitcoins to just over 3. With current Bitcoin prices (trading at about $ 21,000 at publication), that means the reward will drop from $ 136,500 to $ 65,625 in 2024.

So, like everyone else right now, even Bitcoin miners have to tighten their belts. When profits fall, competition can dry up, making it easier for miners who stick to earning rewards. But how much will crypto continue to crash? How long does it take until the next shoe falls and, for example, another large stack coin fails as Terra did and caused a further decline in the market? Some miners in cryptocurrency see the signs and are already sell away their equipment. But the Bitcoin mining business is going nowhere yet. However, the insanely profitable times look like they are over.