Crypto miners moved over $ 300 million with bitcoin in one day

New data from the blockchain analysis company CryptoQuant shows that miners are quickly leaving their bitcoin positions.

14,000 bitcoin, worth more than $ 300 million at current prices, were transferred from miners’ wallets over a single 24-hour period late last week – and in recent weeks miners have loaded the largest amount bitcoin since January 2021. The phenomenon is called “miner capitulation”, and it typically indicates that miners are preparing to sell their previously mined coins to cover current mining expenses.

Bitcoin is currently trading at around $ 21,600, an increase of about 3% over the last 24 hours. Nevertheless, the broader crypto market has been in decline for several months, with bitcoin down almost 70% from its peak of around $ 69,000 in November 2021.

Meanwhile, inflation is on the rise, and energy costs are reaching record highs as the war between Russia and Ukraine rages.

Lower bitcoin prices and higher energy costs are compressing profit margins for miners, which is part of the reason why some sell bitcoin at current prices to try to limit exposure to continued volatility in the sector and further reduce bottom line risk.

“Given rising electricity costs, and bitcoin’s sharp drop in prices, the cost of extracting a bitcoin may be higher than the price of some miners,” Citi analyst Joseph Ayoub wrote in a July 5 note.

“With high-profile reports of layoffs from mining companies, as well as miners who have used their equipment as collateral to borrow money, the bitcoin mining industry may be under increasing pressure,” the memo continued.

Core Scientific, one of the largest listed crypto mining companies in the United States, sold almost all of its bitcoin in June. CEO Mike Levitt tells CNBC that just like any other business, bitcoin miners have to pay their bills.

“We extract and earn or produce bitcoin, but our costs, expenses and obligations are in dollars,” Levitt said.

It is still profitable to extract bitcoin, says Levitt, with around 50% margins in the industry. It is down from 80% margins at the top.

Last month, Core sold 7,202 bitcoin at an average price of $ 23,000. Levitt tells CNBC that they invested revenue of approximately $ 167 million primarily in growth-oriented activities, including new ASIC servers and additional data center capacity for their self-extracting and co-location businesses.

But they also distributed some of that capital to repay debt and to help settle five-year share grants to employees.

In the long term, Levitt is optimistic because there is an enormous positive operating effect in the business. Above certain levels, every dollar increase in the price of bitcoin is 100% operating income for bitcoin miners.

“We would all cheer loudly if bitcoin were to return to $ 35,000, $ 40,000. There is no doubt about that,” he said.

But productivity per unit of electricity is also important, and when prices are low, large-scale miners like Core Scientific tend to face less competition from hobbyists and small businesses.

“As prices fall, global hash rates – or competition for bitcoin production – fall as less efficient miners emerge from the network,” Levitt explained.

The hash rate is a term used to describe the computing power of all miners in the bitcoin network, and it has fallen by 15% in the last month. It is ultimately a good thing for the big miners who can afford to cope with the downturns.

As less efficient miners emerge from the network and global hashrates decline, machines that continue to extract bitcoin become more productive.

“And so the cost of energy, if you will, per bitcoin produced, goes down,” Levitt said.