Bitcoin (BTC) mining firms are adopting a risk-reducing strategy by moving Bitcoin to exchanges, according to a market report from Bitfinex.
The cryptocurrency trading platform’s latest newsletter discusses the bitcoin mining industry in detail, highlighting the recent surge in the number of miners selling large amounts of bitcoin to exchanges. As institutional interest in BTC picks up in 2023, this leads to a corresponding increase in the stock value of Bitcoin mining companies.
The report pointed out that in recent weeks, the number of Bitcoins sold by Poolin Pool is the highest in the market. The Bitfinex analyst also pointed to the recent all-time high in Bitcoin mining difficulty, labeling it an indicator of “robustness and miner confidence”:
“Miners are clearly bullish on Bitcoin because they’re putting more resources into mining, causing mining difficulties, but they’re hedging their positions, so they’re sending more Bitcoin to exchanges.
The report also indicates that miners are hedging their positions on derivatives exchanges, with a cumulative 30-day volume of 70,000 BTC for the first week of July 2023.
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While miners have historically used derivatives to move bitcoin to exchanges as a tool to hedge large spot positions, the report argues that such high volumes are unusual:
“A transfer to an exchange of this magnitude is extremely rare and may demonstrate new miner behavior.”
Bitfinex also cites data from Glassnode showing that Poolin was responsible for a significant portion of this activity, with BTC mining pools moving BTC to Binance.
Analysts point out that there may be several plausible reasons behind the recent mining activity. This may include hedging activities in derivatives markets, executing off-exchange orders or moving funds through exchanges for other reasons.
An increase in mining difficulty also indicates that new mining power is being added to the Bitcoin network. Analysts said it was seen as a sign of improving network health and growing confidence in mining profitability through higher bitcoin prices or hardware improvements.
“As a result, miners are in a unique position, as the Bitcoin halving approaches, they are rapidly increasing their mining potential while hedging their exposure to a higher and more cautious degree than in previous cycles.”
The report also suggests that on-chain Bitcoin movements reflect a shift in supply from long-term to short-term holders. This type of investor behavior is said to be common in bull market conditions, as new market traders seek quick profits while long-term holders take advantage of rising prices.
Cointelegraph has contacted several mining companies and mining pools to determine the reasons for the increase in bitcoin outflows from miners over the past month. As recently reported, miners have sent over $128 million in revenue to exchanges by the end of June 2023.
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