Bitcoin Miners are HODLing, why Mining Gives You the Edge

May 10, 2021 - Expert Commentary, How-To Articles

Bitcoin Miners Hodl

Market trends between Bitcoin holding Vs. Selling is always fascinating. 

There are periods of wild sell-offs and others when there is a liquidity crunch. That said, the consensus has always been that periods of high prices trigger sell-offs while BTC holders tend to hodl (not sell) when the market is unfavorable. 

This trend generally holds. That was until the monster rally of late 2020 into 2021. Bitcoin went up and never looked back. Some took advantage of the wild rises to make some profit for their Bitcoin holdings. However, this has generally been a Bitcoin purchase season, with institutions leading the way. 

Miners HODLing Bitcoin 

Bitcoin miners have historically been interested in moving numbers. The logic is that you mine BTC and sell it to mine more. Recently, miners are exhibiting different trends. Despite the high prices, miners are not dumping their stash. Instead, they are hodling in unprecedented fashion. 

Data from Glassnode shows that miners are at a positive net position change. This statistic means that more miners are holding onto the asset instead of selling it. 

More miners can hold because revenue from transaction fees is also at a record level. Mining revenue hit an all-time high of $1.5 billion in March 2021. Mining revenue has almost quadrupled in the past year. 

These factors combine to give Bitcoin miners more wiggle room. Before the current bull market, miners were in a tough spot. 

In March 2020, Bitcoin prices cratered below $4,000. Miners had a logistical nightmare in running expensive farms without knowing when prices would rebound. Some had to shut down equipment, particularly older mining rigs that could no longer be profitable.

Therefore, it is only resilient and institutional miners that have been able to get through the past 18 months. The fact that miners are now working with surpluses is remarkable. 

Leading exchanges are still pretty liquid with Bitcoin. Nonetheless, a steady stream of Bitcoin from miners is still necessary to ensure that the Bitcoin demand is met. Should current trends hold, the market may adjust to the lesser amount of Bitcoin in active circulation. 

A Bitcoin Supply Shock Incoming?

Most Bitcoin holders are now looking at long-term trends. This calculation may be the rationale behind the increased amount of hodling, even among miners. It is increasingly becoming likely that Bitcoin may hit a supply crunch in the short term.

Supply-demand economics dictate that such a scenario would be positive for prices. That could be what hodlers are waiting for keenly. Everyone is waiting for the next big Bitcoin breakout. The supply crunch will immediately result in another bull market.

Miners are hodling, institutions are adding crypto to their portfolio, and general Bitcoin interest is at an all-time high. The million-dollar question is: how high is the ceiling for the pioneer crypto? 

Skeptics will still stick their heads up and boldly predict a bear market. However, the horizon seems to be clear of any imminent peril. All factors seem to indicate that Bitcoin prices are only going in one direction. 

The entry of institutions into the crypto market is a game-changer. A company like Tesla would not purchase Bitcoin as a pump and dump strategy. This is a long-term investment that considers Bitcoin fundamentals. 

Tesla joins some Wall Street firms in going big on Bitcoin. Professional firms have since changed their stance on this asset. For many years, they wanted nothing to do with this asset. Now, a consensus is developing that Bitcoin is here to stay as a serious asset. 

Citibank expects Bitcoin to top $300,000 by 2023, while JP Morgan Chase believes it will reach $146,000. These are Wall Street titans with tons of experience with all kinds of speculative assets.  Perhaps it is time for the long-awaited Bitcoin ETFs.

It would still make sense to proceed cautiously. There will be market corrections along the way. However, the general trajectory is a positive one. 

Bitcoin Mining Creates an Edge

Bitcoin is like a river that has a source. The source of more Bitcoin is the newly released Bitcoin to miners.  

Miners earn from verifying Bitcoin transactions and also earn transaction fees for the Bitcoin in that mined block.  This fact means that miners have a reasonably decent chance at continuing to earn Bitcoin even if there is a serious supply crunch soon. 

Besides, Bitcoin miner’s earnings are two-fold. Bitcoin mining rewards continue to decline every four years. Transaction fees will be around as long as Bitcoin continues to be in existence. Therefore, mining is not a short-term trend that could soon prove redundant. 

Sure, equipment needs maintenance now and then. Additionally, mining difficulty resets as more miners jump into the fray. That said, mining is a sustainable model for earning Bitcoin for the foreseeable future. 

The HODLing by Bitcoin miners is no accident. Most miners are implementing delayed gratification with Bitcoin prices. Indeed, selling now is quite lucrative. However, it might lead to regret in the long term. This is true for any investment on an upward trajectory. 

Miners who invested big in hardware and facilities during the Bitcoin market downturn are now reaping the rewards of their investment. Riot Blockchain is arguably the most famous Bitcoin mining stock and currently operates at a market cap of over $1 billion after this market rally. 

The average return for the biggest publicly traded miners was 50X in this bull cycle. This number puts into perspective the potential rewards in Bitcoin mining. Established miners actually made a higher turnover than those who were hodling exclusively.  

Advanced Mining: A Professional Host Using Renewable Energy 

The clear edge for professional Bitcoin miners is the ability to source high-quality equipment and proper facilities. 

Equipment sourcing is not easy in this competitive market where leading equipment manufacturers have sold out their gear for the year. 

Advanced Mining had the insight to order 3,000 S19 and S19 Pro mining rigs from Bitmain last year. This was before the market went to stratospheric heights. 

The equipment is the latest edition of the reputed Antminer ASIC rig series. Accordingly, our data centers in the U.S. operate with highly efficient equipment. 

Talking of the U.S, we are locating our data center next to a hydroelectric plant that will provide cheap renewable power. The Montana plant allows us to mine Bitcoin with zero carbon emissions, a fundamental criticism of Bitcoin mining. We have a green operation.

Bitcoin mining using renewable energy is viable and efficient. There are many unutilized facilities in the U.S., and we are doing our part. Besides, these cheap renewable energy sources can change the dynamic of Bitcoin mining while creating on-site demand for green energy. 

Advanced Mining is a go-to Bitcoin mining host and maintenance provider in the U.S. Our facilities are run by experienced technicians and visionary leaders, allowing clients to take part in what really matters in Bitcoin: Supporting the network by mining. 

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