The Bitcoin mining industry faces capitulation, indicating a potential local price bottom for Bitcoin.
Bitcoin’s hash rate fell 7.7% post-halving, hitting a four-month low and causing miner financial stress.
Miners are selling BTC reserves, leading to increased outflows and contributing to Bitcoin’s recent price decline.
Recent data from CryptoQuant suggests the Bitcoin mining industry is experiencing capitulation, a potential indicator that Bitcoin’s price may be nearing a local bottom. The market intelligence platform analyzed metrics related to miners who secure the Bitcoin network in exchange for newly issued BTC.
One key sign of capitulation is the decline in Bitcoin’s hash rate, which represents the total processing power defending the network. The hash rate dropped 7.7% to 576 exahashes per second (EH/s), the lowest level in the previous four months, after peaking on April 27 at 623 EH/s.
Historically, such a drawdown in hash rate has correlated with conditions where Bitcoin’s price bottoms out. For instance, a similar 7.7% hash rate decline occurred in December 2022, when Bitcoin’s price hit $16,000 before increasing by over 300% in the following 15 months.
This recent decline in hash rate follows Bitcoin’s fourth cyclical halving event in April, which reduced the number of coins paid out to miners by half. According to CryptoQuant’s miner profit/loss sustainability indicator, this halving has left many miners operating at a loss since April 20.
Consequently, miners have turned off mining equipment that is not lucrative. Therefore, since the halving, when both Bitcoin’s base block rewards and transaction fee income were much larger, daily mining revenues have dropped by 63%.
Amid these financial pressures, Bitcoin miners have been moving coins out of their on-chain wallets at an accelerated pace. This suggests they may be selling their BTC reserves. CryptoQuant noted that daily miner outflows have spiked to the highest volume since May 21.
This sell-off by miners, along with sales from Bitcoin whales and national governments, has contributed to Bitcoin’s recent price pullback in June. The decline has also impacted Bitcoin’s “hash price,” a measure of miner profitability per unit of computational power. Currently, the average mining revenue by hash stands at $0.049 per EH/s, just above the all-time low of $0.045 reached on May 1.
At the time of writing, the price of Bitcoin is $57,879.00, and it has traded for $39,884,697,701 during the past day. This indicates a 5.40% price reduction over the last seven days and a 3.78% price decline over the previous 24 hours.
These signs indicate that the Bitcoin mining industry is under significant financial stress. However, the historical correlation between drops in the hash rate and Bitcoin price bottoms provides some hope for a potential recovery. As miners adjust to the post-halving situation, market participants will be watching closely for signs of a price rebound.
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