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Bitcoin: The cost of maintaining this firm’s HODL strategy? 3K BTCs…

23 Jun, 20223 min readBitcoin
Bitcoin: The cost of maintaining this firm’s HODL strategy? 3K BTCs…

Canadian cryptocurrency mining business Bitfarms has sold more than $62 million in Bitcoin in June, using the proceeds to settle its debt. About 3,000 Bitcoins, or roughly 47% of Bitfarms’ total holdings of about 6,349 BTC, have been sold in the preceding seven days, according to a statement released on Tuesday.

According to the company, it will “rebalance its liabilities by lowering its BTC-backed credit facility with Galaxy Digital,” with the $62 million from BTC sales. As of the time of writing, Bitfarms’ debt was $38 million after using the cryptocurrency it sold in June to reduce its credit facility from $100 million to $66 million.

It seems that 1,500 of these BTC were included in the cryptocurrency sold.

Volatile market conditions making situations worse

The decision taken by Bitfarms coincided with severe price volatility seen by popular cryptocurrencies like Bitcoin and Ether. The price of Bitcoin fell below $20,000 for the first time since December 2020, although it has since risen to more than $21,000, as of the time of writing.

The statistics provided by the company show that Bitfarms can generate an average of 14 BTC each day, or roughly 1,260 BTC per quarter. Given that the corporation purchased 1,000 BTC for $43.2 million at the beginning of January, they can thus afford to sell at a loss. At its current price, the same quantity of Bitcoin could be purchased for less than half the price.

However, according to Bitfarms CFO Jeff Lucas, the company had to liquidate its shares to reduce its debt to Galaxy Digital LLC from $66 million to $38 million. He said,

“Given the extremely volatile markets, we have continued to take steps to improve liquidity and to deleverage and strengthen our balance sheet. Specifically, we have sold 1,500 more Bitcoin and are no longer HODLing our entire daily BTC production.”

At a price of more than $41,000, the reported holdings of Bitfarms in January were 4,300 BTC, or almost $177 million. At the time, Founder and CEO Emiliano Grodzki claimed that the goal was “to accumulate the most Bitcoin for the least expensive and in the shortest length of time.”

So, what is important right now?

Despite continuing to be bullish on the long-term price of Bitcoin, Lucas argued that the company must concentrate on its core priorities. These include retaining its position as a top-tier mining operator and pursuing further business growth.

In Quebec, Washington, and Paraguay, Bitfarms operates 7 industrial-scale facilities that are powered by 99% hydro-electricity and protected by long-term energy contracts.

Due to its daily creation of new Bitcoins, Bitfarms would independently revert to being one of the highest-earning mining firms. Despite the financial issues it is facing now, similar to most significant cryptocurrency companies who have had to reduce their workforce and expenses.

The Toronto-based company is the most recent publicly-traded mining company to have sold off its Bitcoin assets to stay in business. Additional miners may feel pressure on their holding strategy as a result of the current market meltdown. Especially as it becomes more difficult for the sector to raise money from the stock market and settle debts.

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