Coinbase Says Miners’ Sales of Newly Minted Bitcoins Don’t Add Significant Market Pressure

A common concern during cyclical downturns in bitcoin (BTC) mining is the extent to which miners are selling their BTC holdings, crypto exchange Coinbase (COIN) said in a research report last week.

In times of market upheaval and a falling bitcoin price, margins compress across the board and force more miners to become net sellers, the note said. Given the price drop and the resulting loss of profitability, the financing environment for the mining industry has “shifted materially” since late last year, and raising capital in the public markets has become very difficult, Coinbase said.

Still, even if all newly issued bitcoin were immediately sold onto the market each day, that would equate to only 900 BTC of selling pressure, which represents just 1%-1.5% of total daily volume, it added. A healthier bitcoin derivatives market should allow miners more options in terms of potential hedging strategies, the report added.

Read more: Crypto Miners Face Margin Calls, Defaults as Debt Comes Due in Bear Market

Mining companies that expanded aggressively in recent years and leveraged their balance sheet in the process are now being forced to restructure their operations, the note said. These conditions “should present opportunities for consolidation across the mining industry in the second half of the year as less prudent miners continue to face challenges.”

While the mining market may still be far from an equilibrium hashrate, miner selling and shuttering of activities in recent months has resulted in a falling network hashrate and ultimately mining difficulty, and once these trends flatten it could signal the start of a bottoming process, based on similar trends observed in the 2018 crypto winter, the report said.

Read more: Bear Market Could See Some Crypto Miners Turning to M&A for Survival