Sale of Bitcoin at a loss by miners is a sign that the currency may have reached a bottom
Bitcoin hashrate is decreasing, just like in December 2022 — after that, it increased 4 times in 15 months.
CryptoQuant analyzed the metrics of miners, who are responsible for securing the Bitcoin network in exchange for newly issued BTC. As outlined in the market intelligence platform's Wednesday report, several signs of capitulation appeared over the last month, during which the price of Bitcoin fell 13%, from $68,791 to $59,603.
One such sign includes a significant decline in Bitcoin’s hashrate, the total computing power securing the network. Since hitting a record high of 623 exabytes per second (EH/s) on April 27, the hashrate has fallen 7.7% to 576 EH/s — its lowest value in four months.
“Historically, an extreme hashrate reduction has been associated with price bottom conditions,” CryptoQuant wrote. Specifically, the 7.7% reduction is similar to an equivalent hashrate reduction in December 2022, when the Bitcoin price bottomed at $16,000 before skyrocketing by over 300% over the following 15 months.
This latest decline in hashrate came after Bitcoin’s fourth cyclical halving event in April, cutting the number of coins paid to miners in half. According to CryptoQuant’s Miner Profit/Loss Sustainability Indicator, this has left miners “mostly extremely underpaid” since April 20, forcing many to shut down mining machines that were now no longer profitable.
Miners have suffered a 63% decline in daily revenue since the halving, when Bitcoin's basic block rewards and transaction fee revenue were much higher.
During this period, Bitcoin miners were seen withdrawing coins from their on-chain wallets at a faster pace than usual, indicating that they may be selling their BTC holdings. “Daily miner outflows reached the highest volume since May 21,” the company wrote.
Between the selloffs by Bitcoin miners, whales and national governments, the June Bitcoin price pullback also hurt Bitcoin’s “hash price” — a metric of Bitcoin miner profitability per unit of computing power.
“Average mining revenue per hash (hash price) remains near all-time lows,” CryptoQuant wrote. “Hash price is at $0.049 per EH/s, slightly above the all-time low of $0.045 reached on May 1.”
Blockchain data shows signs that the Bitcoin mining industry is “capitulating,” according to CryptoQuant. In financial markets, capitulation usually means selling assets at a loss, i.e. at a lower price than the original purchase price.
This is a likely precedent of Bitcoin hitting a local price bottom before rising to new highs.
