The Bitcoin network is currently displaying signs of miner capitulation. This phase is characterized by miners either ceasing their operations or selling off a portion of their Bitcoin reserves. Interestingly, historical data suggests that such a scenario often precedes a bottoming out of Bitcoin prices, ultimately leading to a subsequent uptrend in the asset’s value.
Following the recent halving, the network hash rate has witnessed a decline of 7.7% from its peak on April 27. A report by CryptoQuant indicates that this drop in hash rate may be attributed to less efficient miners shutting down their equipment due to negative profitability. The miner profit/loss sustainability indicator reveals that miners have been facing significant underpayment since April 20, which has culminated in a 63% decrease in daily revenues from $79 million on March 6th to $29 million presently.
Transaction fees now account for just 3.2% of the total revenue, marking the lowest share since April 8. The average mining revenue per hash is also nearing all-time lows at $0.049 per EH/s, slightly above the record low of $0.045 recorded on May 1. Furthermore, there has been a noticeable increase in the outflow of Bitcoin from miner wallets, with daily outflows reaching their highest volume since May 21, indicating a potential selling pressure in the market.
The current phase of miner capitulation mirrors a 7.7% hash rate drawdown observed in December 2022, which subsequently signaled the bottom cycle following the FTX collapse. Past instances of substantial hash rate declines have often coincided with price-bottom conditions in the Bitcoin market. Moreover, the discount at which Bitcoin is currently trading on Coinbase suggests that the asset may be gearing up for a future upward movement.
David Lawant, Falcon’s head of research, recently drew attention to the negative Coinbase premium, likening it to a similar scenario preceding a significant rally from October 2023 to March 2024. Lawant pondered whether it is “always darkest before the dawn,” implying that the current discount on Coinbase could be a precursor to a much-needed rally in Bitcoin prices.
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