Bhutan Shrinks Bitcoin Reserves Amid Worsening Mining Economics

The move happened amid falling prices and rising post-halving mining costs, which sharply reduced the country’s holdings and global ranking among sovereign Bitcoin owners. At the same time, US-based spot Bitcoin ETF investors are mostly holding their positions despite deep unrealized losses and a four-month market downturn. Analysts point out that outflows are still relatively modest compared with the scale of earlier inflows—suggesting that long-term conviction among ETF holders is still intact.

Bhutan Cuts Bitcoin Holdings

Bhutan stepped up Bitcoin offloading from its national reserves, moving more than $22 million worth of the cryptocurrency as prices decline and mining economics deteriorate. On-chain data from Arkham shows that the Himalayan kingdom transferred 184 Bitcoin, valued at roughly $14 million, from its holdings on Wednesday. This followed an earlier transfer of 100.8 Bitcoin worth about $8.3 million late last week, bringing the total value of recent movements to approximately $22.3 million.

According to Arkham, the Bitcoin was sent to QCP Capital, a crypto market maker that often facilitates large asset sales by providing liquidity. While transfers to market makers do not automatically confirm a sale, they are widely seen as a strong indicator that the assets are being prepared for liquidation on the open market. The timing of the transfers also happened Bitcoin prices continued to slide, placing even more pressure on miners whose costs have risen sharply since the 2024 halving event.

Bhutan’s Bitcoin strategy dates back to 2019, when the country quietly launched a state-backed mining initiative powered largely by hydroelectric energy. Since then, the country accumulated an estimated $765 million worth of Bitcoin through mining, making it one of the biggest sovereign holders of the asset. 

However, Arkham data indicates that the cost of mining a single Bitcoin roughly doubled since the most recent halving, which greatly reduced profitability. As a result, Bhutan is now producing far fewer coins than it did during peak periods. In 2023 alone, the country mined approximately 8,200 Bitcoin, which current conditions no longer support.

Government Bitcoin holdings (Source: BitcoinTreasureis.NET)

These recent sales materially reduced Bhutan’s overall Bitcoin reserves. Holdings have fallen from a peak of 13,295 BTC in October of 2024 to roughly 5,700 BTC today. This decline also altered Bhutan’s standing among government Bitcoin holders. Data from Bitcoin Treasuries shows that Bhutan slipped to seventh place globally, now trailing the United States, China, the United Kingdom, Ukraine, El Salvador, and the United Arab Emirates.

While the government has not publicly explained the latest transfers, Arkham pointed out that Bhutan has a history of selling Bitcoin in sizable batches, often around $50 million at a time. 

US Bitcoin ETF Investors Hold On

While Bhutan might be looking to offload its Bitcoin, US-based spot Bitcoin ETF investors are showing relatively strong conviction despite the prolonged downturn in Bitcoin’s price. This is according to commentary from leading ETF analysts and market researchers. 

ETF analyst James Seyffart said in a post on X that ETF holders are “still hanging in there pretty good,” even as Bitcoin continues a four-month downtrend that pushed prices well below recent highs.

Seyffart explained that current ETF investors are experiencing their largest paper losses since US spot Bitcoin ETFs launched in January of 2024. With Bitcoin trading below $73,000, he estimates that ETF holders are sitting on unrealized losses of roughly 42%. Despite this, Seyffart thinks that recent outflows are still modest when viewed against the scale of inflows during the market’s peak. 

Before the October downturn, cumulative net inflows into spot Bitcoin ETFs stood at approximately $62.11 billion, but have since declined to around $55 billion, based on preliminary figures from Farside Investors. Seyffart characterized this pullback as relatively mild given the size of earlier inflows.

Similar observations were shared by investment researcher Jim Bianco, who said the average spot Bitcoin ETF holder is currently about 24% underwater but continues to hold positions rather than capitulate. That behavior suggests a level of long-term conviction, even as price weakness persists.

On the other hand, not everyone is optimistic. Crypto analytics account Rand pointed out that the market has now recorded three consecutive months of ETF outflows for the first time, coinciding with a roughly 25% drop in Bitcoin’s spot price over the past month. 

BTC price action over the past month (Source: CoinCodex)

Some analysts argue that bearish sentiment may be overly narrow in focus. ETF analyst Eric Balchunas warned that investors are being “very short-sighted,” as Bitcoin has gained more than 400% since 2022, far outperforming traditional assets like gold and silver over the same period.