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Bitcoin Mining Industry Capitulation Could Signal Bottom Is Near, Says CryptoQuant
Bitcoin Mining Industry Capitulation Could Signal Bottom Is Near, Says CryptoQuant
According to recent data data from CryptoQuant, the Bitcoin The mining industry is showing signs of “capitulation,” a potential indicator that Bitcoin may be approaching a local price bottom before possibly reaching new highs. The market intelligence platform’s Wednesday report analyzed metrics related to miners, who secure the Bitcoin network in exchange for newly issued BTC.
One significant sign of capitulation is a notable decline in Bitcoin’s hash rate, which represents the total computing power securing the network. After reaching a record high of 623 exahashes per second (EH/s) on April 27, the hash rate has fallen 7.7% to 576 EH/s, the lowest level in four months.
Historically, such a decline in hash rate has been associated with conditions where the price of Bitcoin hits a bottom. For example, a similar 7.7% decline in hash rate occurred in December 2022, when the price of Bitcoin reached $16,000 before increasing by more than 300% in the following 15 months.
This recent decline in hash rate follows Bitcoin’s fourth cyclical “halving” event in April, which reduced the number of coins paid to miners by half. According to CryptoQuant’s Miner Profit/Loss Sustainability Indicator, this halving has left many miners “extremely underpaid” since April 20, leading them to shut down unprofitable mining machines. As a result, daily mining revenues have plummeted by 63% since the halving, when both Bitcoin’s base block rewards and transaction fee revenues were significantly higher.
Amid these financial pressures, Bitcoin miners have been moving coins out of their on-chain wallets at an accelerated pace, suggesting they may be selling their BTC holdings. CryptoQuant noted that daily miner outflows have reached their highest volume since May 21.
This sell-off by miners, coupled with sales by Bitcoin whales and national governments, contributed to the recent Bitcoin price pullback in June. The decline also impacted Bitcoin’s “hash price,” a measure of miner profitability per unit of computing power. Currently, the average mining revenue per hash is $0.049 per EH/s, up slightly from the all-time low of $0.045 reached on May 1.