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⚡Centralised Exchange Bitcoin Reserves Drop to 2018 Lows🪫

Croxroad

12 Aug 2024 — 4 min read

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🐻 From Bull to Bear

Bitcoin reserves on centralised exchanges have reached a critical low, with current levels not seen since November 19, 2018. According to data from CryptoQuant, the amount of Bitcoin held by these exchanges has been steadily declining since early June 2022, with a significant drop over the past month. From July 11 to August 11, 2024, a staggering 99,308 BTC, valued at approximately $5.96 billion, was withdrawn from exchanges. This sharp reduction has brought the total Bitcoin reserves on centralised platforms to 2.67 million BTC, worth around $161 billion.

This downward trend mirrors a similar pattern observed with Ethereum (ETH) reserves on centralised exchanges. As of August 11, 2024, exchanges are holding 16.8 million ether, a notable decrease from the record high of 35.44 million ETH on June 4, 2020. A significant portion of this reduction occurred after September 15, 2022, when 11.44 million ether, valued at nearly $30 billion, was withdrawn from these platforms. The decline in both Bitcoin and Ethereum reserves signals a broader shift in user behaviour, with more individuals moving towards self-custodial solutions rather than relying on centralised exchanges.

The continued outflow of Bitcoin and Ethereum from centralised exchanges highlights the growing trend of users prioritising security and self-custody. This movement reduces the liquidity of these assets on exchanges, increasing their scarcity and potentially driving up their value over time. As more crypto enthusiasts embrace the principles of decentralised finance (DeFi) and securing their own keys, the market may see long-term benefits, particularly for those committed to holding these assets for the future.

🔒 Bitfarms’ Earnings Take a Hit

Toronto-based Bitcoin mining company Bitfarms reported a challenging second quarter in 2024, disclosing a net loss of $27 million, or 7 cents per share, which includes a $1 million non-cash expense related to the revaluation of warrant liabilities. This marks a significant increase in losses compared to the first quarter of 2024, where the company reported a net loss of $6 million. The decrease in revenue, which fell by 16% to $42 million, is largely attributed to the reduction in block rewards following the Bitcoin halving event on April 19, 2024. Additionally, the company saw a rise in production costs, with the average direct production cost per Bitcoin increasing to $30,600 from $18,400 in the previous quarter.

Despite the financial challenges, Bitfarms showed resilience, reporting a 34% increase in Bitcoin earnings in July, generating 243 BTC valued at $14 million, up from 189 BTC worth $11 million in June. The company’s Chief Financial Officer, Jeff Lucas, emphasised the strength of Bitfarms’ balance sheet and capital-efficient growth strategy, stating that their 2024 growth and efficiency improvement plans are fully funded. These plans are focused on achieving a significant increase in mining capacity, with a target of reaching 21 EH/s and 21w/TH by the end of the year. Meanwhile, newly appointed CEO Ben Gagnon highlighted Bitfarms' ongoing expansion efforts, including the addition of a new site in Sharon, PA, marking the company’s first foray into the PJM region, which he described as the most promising energy market in the United States.

Bitfarms also addressed the recent hostile takeover attempt by competitor Riot Platforms, which had proposed a $950 million acquisition in April but later withdrew the offer due to difficulties in negotiations. The company’s Special Committee reaffirmed its commitment to remaining independent, unanimously deciding to continue executing Bitfarms’ strategic plan as a public company. However, the board and management indicated they remain open to considering opportunities that could enhance shareholder value, underscoring their focus on maximising returns for investors while maintaining the company’s independent path.

🆕 Individual Retirement Account

In the rapidly evolving world of cryptocurrency, many investors are looking for ways to integrate their digital assets into their retirement planning. However, it's important to clarify a common misconception: there is no specific Individual Retirement Account (IRA) designed exclusively for cryptocurrencies recognized by the Internal Revenue Service (IRS). When you come across terms like "cryptocurrency IRA" or "Bitcoin IRA," they actually refer to traditional IRAs that permit the inclusion of digital currencies within their investment portfolios. Since the IRS began treating cryptocurrencies as property in 2014, they are subject to the same tax regulations as stocks and bonds. Consequently, to include cryptocurrencies in your IRA, you’ll need to work with a custodian who can facilitate this process, as direct investment in digital assets by the account holder is not permitted. In this new series, we'll explore how you can effectively navigate these regulations and make the most of your cryptocurrency investments within your retirement strategy.

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