CryptoQuant, a market intelligence firm, has observed indicators that Bitcoin miner capitulation metrics are nearing levels similar to those seen after the FTX crash in late 2022, suggesting a potential bottom for Bitcoin prices.
Miner capitulation occurs when miners scale back operations or sell part of their mined Bitcoin and reserves either to sustain themselves or to “earn yield or hedge their Bitcoin exposure.”
In recent times, as Bitcoin’s price declined by 13% from $68,791 to $59,603 over the last month, signs of capitulation have become more evident.
One significant indicator of this trend is the decrease in Bitcoin’s hashrate, which is the total computational power used to secure the network.
This hashrate has fallen by 7.7% to 576 EH/s, reaching a four-month low after previously hitting a record high on April 27.
This drop in hashrate mirrors a similar reduction seen in late 2022, which historically correlated with the market bottoming out at $15,500 before a subsequent 300% increase in Bitcoin’s price over the following 15 months.
CryptoQuant’s analysis also points out that since the last Bitcoin halving, miners have been substantially undercompensated, as shown by the miner profit/loss sustainability indicator.
This has resulted in a 63% reduction in miners’ daily revenues from $79 million on March 6 to $29 million currently, with revenues from transaction fees dropping to just 3.2% of the total, marking the lowest since April 8.
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Moreover, the decline in revenue has compelled miners to dip into their reserves to generate yield, leading to a notable increase in daily miner outflows, the highest since May 21.
This trend suggests that miners might be selling off their Bitcoin reserves.
Despite significant outflows in May, they remained below extreme levels (twice the 1-year average), indicating a measured approach to selling.
The overall impact of these sales, combined with those from Bitcoin whales and national governments, has pressured Bitcoin’s price to a four-month low of $53,499 on July 5.
Furthermore, the downturn has affected the ‘hash price,’ a metric of mining profitability per unit of computational power, which now stands at $0.049 per EH/s, barely above the record low of $0.045 seen on May 1.
Reflecting on the broader implications, a report from Cantor Fitzgerald highlighted that major mining firms could face significant challenges if Bitcoin prices were to drop to $40,000, underscoring the precarious situation of the mining industry.
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