The Bitcoin network is currently experiencing some signs of miner capitulation. This phase is characterized by miners either stopping their operations or selling off part of their Bitcoin reserves. Following the recent halving event, the network hash rate has declined by 7.7% from its peak in April. This decrease in hash rate could indicate that less efficient miners have decided to shut down their equipment due to negative profitability.
According to CryptoQuant’s latest report, miners have been facing significant challenges in terms of profitability since April 20, the day after the halving event. Daily revenues have dropped by 63% from $79 million on March 6th to $29 million currently. Transaction fees now make up just 3.2% of the total revenue, the lowest share since April 8. The average mining revenue per hash is also nearing all-time lows at $0.049 per EH/s.
Miners have been observed transferring Bitcoin out of their wallets at increased rates, with daily outflows reaching their highest volume since May 21. This uptick in outflows may suggest that miners are possibly selling off their Bitcoin holdings. Historically, similar instances of miner capitulation, such as the 7.7% hash rate drawdown observed in December 2022, have been associated with price-bottom conditions.
The current phase of miner capitulation could potentially set the stage for a price rally in Bitcoin. The fact that Bitcoin is currently trading at a significant discount on Coinbase may indicate that the asset is gearing up for an upward movement. Falcon’s head of research, David Lawant, has highlighted this point, referencing past instances where a negative Coinbase premium was followed by a substantial rally. This discount could serve as a precursor to a much-needed price rally in the near future.
The current state of miner capitulation within the Bitcoin network may have significant implications for the future price movement of the cryptocurrency. While miner profitability has been under pressure, the historical relationship between miner capitulation and price bottoms suggests that a potential rally could be on the horizon. Investors and market observers will need to closely monitor the situation to assess the impact of miner capitulation on Bitcoin prices.
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