The U.S. government recently transferred close to $600 million worth of Bitcoin to Coinbase. This sparked some concerns that the government might plan to sell the BTC, but analysts suggest the transfer may only be for secure custody. Meanwhile, the upcoming U.S. election raised questions about the future of Bitcoin, especially in the mining industry. U.S.-listed Bitcoin mining companies are increasingly turning to debt financing to survive after the last Bitcoin halving, and raised over $2.2 billion in 2024 to keep operations going.
BTC Worth $600+ Million Moved by US Government
The United States government has transferred almost $600 million worth of Bitcoin (BTC) to Coinbase. This raised some concerns about potential market impacts. On Aug. 15, the government moved 10,000 BTC, which is valued at over $593 million, to a Coinbase Prime deposit wallet, according to on-chain analytics firm Arkham Intelligence.
Despite fears of selling pressure, it is unlikely that these Bitcoins will be sold immediately, according to Ryan Lee, chief analyst at Bitget Research. Lee pointed out that this transfer does not necessarily indicate an imminent sale due to a recent partnership between the US Marshals Service and Coinbase Prime to safeguard and trade large digital assets.
Large Bitcoin holders, or whales, can have a huge influence on the cryptocurrency’s price, and investors closely watch these movements to anticipate any potential market shifts. However, the government’s transfer might not be for active trading but rather for secure custody.
Lee suggested that the assets could be held by Coinbase for safekeeping, especially given Coinbase's role as the primary custodian for US ETFs. A sale of this magnitude would have a considerable impact on Bitcoin’s price because of current market liquidity, making it a very unlikely scenario.
The Bitcoin in question was originally seized during the 2022 Silk Road raid when the Department of Justice confiscated 50,000 BTC from the dark web marketplace. This transfer from the government caught the attention of the crypto community because the funds have been relatively dormant since their seizure.
Silk Road allowed users to trade illicit goods, but was shut down over a decade ago. Its founder, Ross Ulbricht, was arrested in 2013 and is currently serving two life sentences without parole. The US is the largest geopolitical holder of Bitcoin, and has been very cautious with these assets. Presidential candidate Donald Trump even promised not to sell the government’s Bitcoin holdings if he gets elected.
Harris Campaign Faces Skepticism from Bitcoin Miners
Democratic presidential nominee Kamala Harris has gotten support from some crypto users who see her campaign as a chance for a “reset,” but there is still some skepticism from the mining industry. MARA, a crypto mining firm, has made an effort to interact with both political parties ahead of the 2024 election but has received more positive responses from Republicans.
In June, Republican nominee Donald Trump met with mining companies, and pledged to have all Bitcoin “made in the USA.” He reiterated the promise he made at the Bitcoin 2024 conference in July.
Criticism of the Biden administration’s approach to crypto, particularly from Securities and Exchange Commission (SEC) Chair Gary Gensler and Senator Elizabeth Warren, has been a point of contention. Warren is very well known for her stance on the environmental impact of mining, and has been vocal about the negative consequences.
Harris’ campaign, which is still less than three weeks old, has not addressed crypto or blockchain technology directly just yet. However, some suggest that she should clarify her position on digital assets before the election.
Fred Thiel, the CEO of MARA, pointed out that while Trump’s and Robert F. Kennedy Jr.’s campaigns reached out to the industry early, Democratic efforts to involve Harris have been less effective. Thiel is concerned that a Harris administration might take an aggressive stance against Bitcoin, which will certainly not be welcomed by the industry.
Harris is expected to announce her economic agenda soon, with a focus on reducing corporate price gouging and controlling inflation. Thiel doubts that Bitcoin will even be mentioned, which he sees as an indication that her stance will not change from the Biden administration’s. He added that supporting a candidate hostile to the crypto industry would be detrimental to his company’s shareholders.
Despite the uncertain future for Bitcoin miners, MARA is still working on new developements, and even recently announced that all Bitcoin blocks produced in the US would be stamped with “Made in USA.”On the other hand, some in the industry are considering moving operations offshore in anticipation of unfavorable policies from a potential Harris administration.
US Bitcoin Miners Turn to Debt for Survival
Luckily, it seems like Bitcoin miners still have the support of investors. Publicly listed Bitcoin mining companies in the United States are increasingly turning to debt financing to increase cash flow after the recent Bitcoin halving that reduced miner rewards and tightened profit margins.
According to data from BlocksBridge Consulting, nine out of 13 U.S.-listed mining firms raised a combined $1.25 billion through stock offerings in the second quarter of 2024. These companies include Bitdeer, Bitfarms, Cipher, CleanSpark, Core, HIVE, Marathon, Riot, and Terawulf.
Additionally, Iris Energy secured $458 million in the same period, pushing the total raised by miners to over $1.7 billion. With an extra $530 million raised in the third quarter so far, the sum has exceeded $2.2 billion.
Debt financing activities of public miners (Source: Miner Weekly)
On Aug. 14, Core Scientific announced a $400 million private offering of convertible notes, and plans to use the net proceeds to pay off outstanding loans and redeem senior secured notes due in 2028. Convertible notes are debt securities that can be converted into equity later. Marathon Digital also launched a $250 million private offering on Aug. 12 to buy more Bitcoin and address various corporate expenses, including debt repayment and working capital.
CleanSpark shared in its Q2 filing that it secured credit facilities with Coinbase for loans backed by Bitcoin, while Canaan pledged 530 BTC to secure loans totaling $19.2 million, with a maturity date of 18 months.
The latest Bitcoin halving in April reduced miner rewards from 6.25 BTC to 3.125 BTC per block, leading to tighter margins as Bitcoin's price declined from around $64,300 in April to $56,866, an 11+% drop.
In response to these challenges, miners are diversifying their revenue streams. Core Scientific, for example, entered a 12-year agreement with artificial intelligence cloud provider CoreWaeve to host Nvidia GPUs. The deal is expected to generate $6.7 billion in revenue for the company.
