Bitcoin miners are facing a critical phase known as “capitulation” as their profits diminish amidst a sell-off in the Bitcoin market.
In a recent post on X, market intelligence firm CryptoQuant revealed that the metrics measuring miner capitulation are nearing the levels observed during the market bottom following the FTX crash in late 2022, suggesting a potential bottom for Bitcoin.
Miner capitulation occurs when miners reduce their operations or sell a portion of their mined Bitcoin and reserves to sustain their operations, earn yield, or hedge their Bitcoin exposure.
Over the past month, CryptoQuant analysts have identified several signs of capitulation coinciding with a 13% drop in Bitcoin’s price from $68,791 to $59,603.
#Bitcoin Miner capitulation mirrors Dec 2022 levels with a 7.7% hashrate drop, similar to post-FTX collapse conditions.
Such declines often signal potential market bottoms. pic.twitter.com/OZ3PnDdKKf
— CryptoQuant.com (@cryptoquant_com) July 5, 2024
Bitcoin Hashrate Declines
One significant indicator of capitulation is the decline in Bitcoin’s hashrate, which represents the total computational power securing the Bitcoin network.
The hashrate has experienced a substantial 7.7% decrease, hitting a four-month low of 576 EH/s after reaching a record high on April 27.
The similarity between this decline and the post-FTX collapse conditions in December 2022 suggests a potential market bottom.
It is worth noting that the 7.7% drawdown in hashrate observed recently is comparable to the decline witnessed in late 2022, when Bitcoin’s price bottomed at $15,500 before experiencing a remarkable surge of over 300% in the subsequent 15 months.
The CryptoQuant report also highlights the challenges faced by miners since the halving.
Miners have been significantly underpaid during this period, as indicated by the miner profit/loss sustainability indicator.
Their daily revenues have declined by 63% since the halving, where both Bitcoin’s base block rewards and transaction fee revenue were higher.
The total daily revenues have dwindled from $79 million on March 6 to $29 million at present.
Additionally, the revenue generated from transaction fees now accounts for only 3.2% of the total daily revenues, marking the lowest share since April 8.
Consequently, Bitcoin miners have been compelled to tap into their reserves to earn additional yield.
CryptoQuant’s data reveals a spike in daily miner outflows, reaching the highest volume since May 21, indicating that miners may be selling their BTC reserves.
Bitcoin Price Drops Amid Sell Off
The ongoing sell-off by miners, coupled with sales from Bitcoin whales and national governments, has contributed to the recent price pullback in Bitcoin.
On July 5, Bitcoin plummeted to a four-month low of $53,499.
This decline has also impacted the profitability of miners, as measured by the “hash price,” which represents the miner profitability per unit of computational power.
Presently, the average mining revenue per hash is $0.049 per EH/s, slightly higher than the all-time low of $0.045 recorded on May 1.
As reported, the total market capitalization of the 14 U.S.-listed Bitcoin miners reached an all-time high of $22.8 billion on June 15.
Last month, Bitcoin mining stocks experienced significant gains following a promise by United States presidential candidate Donald Trump to boost mining operations within the country.
At the time, Trump expressed his desire for all remaining Bitcoin to be produced in the United States, emphasizing the potential for the country to become energy dominant.
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