The Bitcoin network is currently experiencing signs of miner capitulation, with miners either ceasing operations or selling off a portion of their Bitcoin reserves. This phenomenon typically indicates a bottoming out of Bitcoin prices and is often followed by a resurgence in the asset’s value. Since the recent halving, the network hash rate has fallen by 7.7% from its peak on April 27. This decline is believed to be a result of less efficient miners shutting down their operations due to negative profitability.
According to a report by CryptoQuant, the sustainability indicator for miner profit/loss has revealed that miners have been underpaid since April 20, just after the 2024 Bitcoin halving. 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 (hash price) is also nearing all-time lows at $0.049 per EH/s, slightly above the record low of $0.045 on May 1. The increased rate of Bitcoin outflows from miner wallets suggests potential selling activity.
The current phase of miner capitulation is reminiscent of a 7.7% hash rate drawdown observed in December 2022, which signaled the bottom of a cycle following the FTX collapse. Such significant declines in hash rate have historically been associated with price-bottom conditions. Adding more weight to the price-bottom thesis is the substantial discount at which Bitcoin is currently trading on Coinbase. This discount may indicate that the asset is primed for an upward movement, as pointed out by Falcon’s head of research, David Lawant.
David Lawant referenced historical data in a recent post on X, questioning if it is “always darkest before the dawn.” He noted that the last time the Coinbase premium was this negative, it was followed by a massive rally from October 2023 to March 2024. Consequently, the current discount on Coinbase could be a precursor to a much-needed rally in Bitcoin prices. This could potentially be the beginning of a new upward trend for the cryptocurrency.
The current state of miner capitulation in the Bitcoin network suggests that a significant shift in prices may be on the horizon. The historical patterns and indicators point towards a potential price recovery and the beginning of a new bullish cycle for Bitcoin. Investors and traders are advised to keep a close eye on these developments as they could signal a turning point for the cryptocurrency market.
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