How Do Bitcoin Miners Generate Cash Without Selling Crypto Holdings?

Bitcoin BTC/USD miners have embraced new strategies to finance operations without selling any of their crypto holdings.

What Happened: According to a recent report from Bloomberg, Bitcoin mining firms like Marathon Digital Holdings. MARA are selling Bitcoin call options to raise money, instead of the underlying asset itself.

See Also: How To Buy Bitcoin

“We use call option straddles, where essentially you sell a call option and then buy one at a higher price so that you don’t miss out on the upside,” Marathon CEO Fred Thiel told Bloomberg.

 “Historically, it has generated more than 10% annually.” 

Joshua Lim, head of derivatives at New York-based brokerage Genesis Global Trading, believes that this type of strategy is ideal in a range-bound market and will outperform a “mine-and-hold” or “mine-and-liquidate strategy.” 

Why It Matters: Bitcoin has been trading in and around $38,000 and $47,000 for the better part of the last three months. This limits the risk for those selling options as there is a lower likelihood that the exercise price will be breached turning the contract profitable for a buyer. 

Marathon also employs other yield-generation strategies like lending out Bitcoin from 25% of its holdings.  

Last month, the company said it produced 1,258.6 self-mined bitcoin during Q1 2022, a 556% increase from 191.8 self-mined bitcoin in Q1 2021. Marathon also increased its total Bitcoin holdings to 9,373.6 BTC with a fair market value of approximately $427.7 million.

Price Action: According to data from Benzinga Pro, MARA shares closed 6.79% higher on Tuesday at $16.66.

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Posted In: CryptocurrencyNewsSmall CapMarketsBitcoinbitcoin miningFred Thiel