From HODler Confidence to Mining Transformation

2022 has been a brutal year for the crypto investors market by the harsh crypto winter. It all started with the collapse of the TerraUSD algorithmic stablecoin, which prompted other major crypto players to fall like dominos: Three Arrows Capital. Voyager Digital, Celsius Network, FTX, BlockFi.

Not one project, protocol, or institution exists that hasn’t felt the sting of contagion this year. Bitcoin futures volumes are hovering near multi-year lows owing to the tightening liquidity, widespread deleveraging, and the impairment of several lending and trading desks in the sector. Open Interest, too, took a similar turn following the catastrophic fall of FTX. Bitcoin miners also bled heavily.

Despite spectacularly large losses, the accumulation trend stays strong in this bear market.

HODlers Remain Unfazed

Bitcoin is currently locked in the narrow range of $16,000 to $18,000 as the market continues to suffer from lingering macroeconomic uncertainty. That hasn’t stopped investors from piling up the tokens.

According to Glassnode’s last edition of the year, the density of coin re-accumulation has increased after each market leg down. One that stood out, in particular, is the period between June to October when between $18k and $24k coins were acquired. The report stated,

“2022 was a brutal year, and it has driven volatility and volumes to multi-year lows, as liquidity and speculation dry up. With speculators gone, Bitcoin Long-term Holder supply has pushed to yet another ATH, and investors appear to be stepping in with increasing coin volume on each price leg down.”

While institutions are being cautious, it’s the retail investors who are accumulating more and more Bitcoin. In fact, recent data suggest that nearly 17% of Bitcoin’s total circulating supply is now held by retail investors. According to Glassnode, such holders are those with less than 10 BTC in a wallet (currently worth $169K at today’s prices.) The percentage of Bitcoin supply held by retail investors has been on an upward trajectory since 2011.

Mining Revenue Slump

Bitcoin mining has undergone a dramatic transformation this year after being hit by significant income stress. A large portion of Bitcoin’s active hash rate was switched off, which triggered the difficulty adjustment to fall by 7.32% most recently.

Over the past couple of months, many operators have taken their ASIC rigs offline while several other miners slid to bankruptcy or are on the verge of one. Compute North was the first in line to file for bankruptcy back in September.

Three months later, another prominent Bitcoin miner – Core Scientific – filed for Chapter 11 bankruptcy protection in Texas. Greenidge also approached the NYDIG to prepare for restructuring the financial debt of $74 million, though bankruptcy is still on the cards.