Crypto miners of all sizes are amassing bitcoin, causing a “supply shock” in the bitcoin market that has helped drive up prices, according to a new research from Kraken Intelligence.
According to the research, crypto miners that rely on mining pools appear to be accumulating bitcoin, with only a tiny number of miners profiting even as bitcoin recently reached an all-time high.
“Both large-scale corporations and smaller actors who secure the network through mining pools appear to be accumulating bitcoin,” said Pete Humiston, manager at Kraken Intelligence, in an email to CoinDesk. This “supply shock” appears to have contributed to bitcoin’s price increasing by more than 50% month to date.
The cryptocurrency phrase for retaining assets, “hodling,” has been a popular tactic among the top publicly traded miners. According to the September operating updates from miners like Riot Blockchain, Marathon Digital, and Hut 8, they have all been hoarding the bitcoins earned in September.
Some miners are using these bitcoins to supplement their funding and balance sheets. “We’ve seen publicly traded mining businesses, such as Argo Blockchain, use bitcoin as collateral to acquire fresh finance for additional capital investment,” Humiston added.
However, smaller miners taking some profit doesn’t necessarily reflect bearishness on their part. Rather, it’s likely helping them buy more mining computers, according to Humiston. “Smaller players could be selling into the bitcoin rally to fund the purchase and upkeep of ASIC mining rigs,” he said.
Regardless of how miners use their newly created currencies, the reality remains that a huge majority of them are still holding bitcoins they are mining, a lucrative operation. This is visible as more corporations diversify their operations into mining, even if they have no prior ties to the industry.
As a result, not only is the mining industry benefited, but so is the Bitcoin network as a whole. “We can interpret the recent surge in bitcoin mining investment not only as a further signal of rebounding confidence in the crypto asset space, but also argue that a resilient mining sector reinforces the network’s overall resilience, vis à vis the primary value proposition of Bitcoin itself,” Humiston said.