Earnings results published by publicly listed crypto mining companies this past week underscored considerable losses in line with an extended Bitcoin bear market in the second-quarter.
At the smaller end of the market, Toronto-listed Bitfarms (TSX-V:BITF) reported net losses of US$142mln, a staggering year-on-year (YoY) increase of 3,550%.
Meanwhile, NASDAQ-listed Greenidge Generation reported net losses of US$107mln, a slightly less staggering yet still alarming YoY increase of 3,050%.
Greenidge responded by putting planned developments on the backburner and concentrating efforts at its two existing sites in South Carolina and New York.
HIVE Blockchain Technologies’ first-quarter results underscored net losses of US$95mln, compared to net income of over US$23mln in the year prior.
At the upper end of the market, Riot Blockchain was hit by US$366mln in losses while Marathon Digital chalked up losses of nearly US$200mln.
But the most eye-watering result was Core Scientific’s operating losses of over one billion dollars.
Market valuations have also been spiralling throughout the year: Bitfarms (TSX-V:BITF) and Greenidge are down 61% and 78% respectively year to date, Core Scientific is down 70%, and other big caps tend towards the 50% mark.
Sell the dip
Poor earnings results were hardly unexpected given that revenues are directly tied to bitcoin’s market value, but the response from some enterprises has culminated in an alarming trend.
Across the sector, miners are being strong-armed into selling huge sums of bitcoin at bargain prices in order to stay afloat and as Arcane Research shows, miners are selling far more than they are producting.
In June alone, miners sold nearly 400% the amount of BTC actually mined, up from just over 100% in May and though selling pressure cooled off in July, was still as much as 160%.
In comparison, miners have historically only sold between 20% and 40% of production.
Selling pressure eased off in July, but still outstripped production rates – Source: arcane.no
Miners are effectively making more from selling BTC than actually mining BTC, undoubtedly a business model with an extremely limited shelf life.
Core Scientific has been the most prolific seller, having dumped nearly 12,000 BTC while only mining around 3,300.
With only 2,000 BTC on the books left to sell, the company will need to start looking at other ways to prop up its balance sheet.
Northern Data, Argo and CleanSpark rounded of the top-five BTC sellers – Source: arcane.no
Bitfarms sold 3,357 BTC for aggregate proceeds of US$69mln; over 160% more than the 1,257 BTC it mined.
According to Arcane’s research, public Bitcoin miners collectively held 33,772 BTC as of August 14, a 27% reduction from the all-time high in April.
A some of the largest institutional holders of bitcoin, these trends can have a dramatic effect on market sentiment.
A bit of optimism
As I wrote in early June, the bitcoin mining sector has faced a myriad of trials in recent years, but the nascent industry has managed to innovate and adapt its way through them.
Whether every public bitcoin miner makes it out of the bear mafrket in tact is yet to be seen, but balance sheets could start looking a bit healthier if the positive recent action on the charts shows some sustainability.
Meanwhile, it will also be interesting to see how Ethereum-exposed miners like HIVE manage to navigate Ethereum’s transition away from mining in the coming weeks.
We shall wait and see.