Bitcoin Miners Are Now Busy Accumulating After Selling the Inventory Earlier This Year
Bitcoin mining stocks enjoy far greater returns than the cryptocurrency itself, 2.5% for every 1% move in BTC, becoming a “high beta play” on bitcoin.
Bitcoin price made its way above $57k today after falling under $53k on Tuesday.
This uptrend came following Elon Musk tweeting about Tesla now accepting Bitcoin and that any payment received will be held instead of converting into fiat currency. Trader and economist Alex Kruger noted,
“Nothing like good old-fashioned bullish news to reverse a short-term downtrend. Yes, Tesla accepting Bitcoin payments and running its own Bitcoin nodes is massively bullish. Others will follow.”
However, the option expiry this Friday looms over the price. Because the Bitcoin options market, both volume and open interest (OI), has been rising steadily since 2019, these expiries hold meaning for the price.
The maximum pain shows at which strike price the lowest amount would be owed to option buys by sellers if price expires there, for this expiry is $44k. However, Deribit clarifies that “it does not mean the market will move to this level, but it does imply that after Friday, this potential downward pressure is gone.”
Interestingly, Bitcoin miners have also stopped selling after unloading a good amount of their mined BTC earlier this year.
“It is rational for publicly traded Bitcoin miners to become net purchasers of BTC rather than sellers,” commented bitcoin bull Michael Saylor, CEO of MicroStrategy.
— Documenting Bitcoin 📄 (@DocumentingBTC) March 23, 2021
Stocks of Bitcoin mining have actually been enjoying far greater returns than the cryptocurrency itself.
According to an analysis from Fundstrat Global Advisors, the mining companies that are fairly new and young have reached over $1 billion in market cap after investing heavily during the downturn in the hardware and facilities to “strike it big” in the bull cycle.
Leeor Shimron, vice president of digital-asset strategy at Fundstrat, described miners as a “high beta play” on bitcoin in a note last week.
During this bull run, the biggest publicly traded miners recorded an average return of 5,000% compared to Bitcoin’s over 900%. These companies generate a return of 2.5% for every 1% move in the crypto asset.
Meanwhile, FT reports Bitcoin mining is impacting the costs of chips, which are used in smartphones, TVs, and cars. As we reported, already the semiconductor industry is struggling with a global shortage, and the growing demand from crypto miners is adding to the issue. CW Chung, head of research at Nomura in Seoul says,
“Added demand from cryptocurrency miners is coming when the chip industry is dealing with simultaneous crises — from supply constraints to a structural shortage of high-end chips.”
“The squeeze should last through the end of the year.”
“Cryptocurrency industry demand can have a significant influence on the chip market — during the last bitcoin rally, they were a tenth of TSMC's entire sales.”
Bitcoin hash rate is near its ATH at 150 Th/s, difficulty at its peak of 20 trillion, and mining profitability at $0.35 per 1 THash/s last seen in June 2019, as per Bitinfocharts.
With the bull market not yet nearing its end, this might make things worse before they better.