Bitcoin Miner Capitulation An Indicator of the Next Bull Market
Bitcoin’s hash rate has seen a 7.7% decline from its peak in April, indicating potential capitulation among miners. This reduction in computational power comes as miners grapple with diminished profitability post the halving event and lower Bitcoin prices. Concurrently, there has been a notable increase in daily miner outflows, suggesting heightened selling of Bitcoin holdings.
Historically, miner capitulation has often signaled price bottoms for Bitcoin, presaging significant upticks. The current scenario mirrors December 2022, when Bitcoin hit a low before skyrocketing 300%.
Recent data from CryptoQuant reveals signs of miner capitulation, potentially marking a turning point for Bitcoin’s price trajectory. The network’s hash rate, a measure of mining power, has dropped to 576 exahashes per second (EH/s) from a peak of 623 EH/s on April 27, the lowest in four months. This decline resembles December 2022, preceding a remarkable surge in Bitcoin’s value over the next 15 months.
The April halving event, halving block rewards, has intensified pressure on miners. Since April 20, many miners have struggled with drastically reduced revenues, forcing them to shut down unprofitable mining operations.
Miners’ daily revenues have plummeted by 63% post-halving, factoring in reduced rewards and transaction fees. This financial strain has prompted increased selling of Bitcoin, with daily outflows reaching highs not seen since May 21. Analysts note that miners have sold over 2,300 BTC in just three days, amounting to approximately $145 million.
The average mining revenue per hash, known as hash price, has also dropped to nearly record lows, currently at $0.049 per EH/s, just above the all-time low of $0.045 on May 1st. This metric directly impacts miners’ earnings based on their computational contributions to the network.
Miner capitulation historically aligns with significant price bottoms for Bitcoin. When miners, often steadfast holders of Bitcoin, are compelled to sell off their reserves, it can alleviate selling pressure once the capitulation phase concludes, setting the stage for a potential price rebound.
Market observers like Scott Melker suggest that Bitcoin’s market could soon show a crucial signal. A daily candle closing below $60,300 might trigger a bullish divergence, with the Relative Strength Index (RSI) moving out of oversold territory, akin to patterns observed around $26,000 last August.
However, Andrew Kang offers a cautious perspective, highlighting the risk of Bitcoin breaching its four-month trading range, reminiscent of the pattern observed in May 2021 post a steep rally. With over $50 billion in crypto leverage at near-record levels and an 18-week consolidation phase lacking extreme corrections, Kang suggests that a deeper reset toward the $40,000s might be possible, possibly involving months of volatile or downward price movements before a reversal.
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