Recent data from CryptoQuant indicates that the Bitcoin mining industry is experiencing a phase of “capitulation,” suggesting a potential near-term price bottom for Bitcoin, followed by possible upward movement towards new highs. The analysis, released in a Wednesday report by the market intelligence platform, focuses on metrics related to miners who secure the Bitcoin network in exchange for newly minted BTC.
One key indicator of this capitulation phase is a significant decline in Bitcoin’s hash rate, which measures the total computational power securing the network. Since reaching a peak of 623 exahashes per second (EH/s) on April 27, the hash rate has dropped by 7.7% to 576 EH/s, marking its lowest level in four months.
Historically, such reductions in hash rate have been associated with periods where Bitcoin’s price stabilizes or bottoms out. Notably, a similar 7.7% decline in hash rate occurred in December 2022, preceding a subsequent price surge of over 300% in the following 15 months.
The recent downturn in hash rate follows Bitcoin’s most recent “halving” event in April, which cut in half the number of coins rewarded to miners. According to CryptoQuant’s miner profit/loss sustainability indicator, this halving has significantly impacted miner profitability since April 20, prompting the shutdown of unprofitable mining operations. Consequently, daily mining revenues have plunged by 63% since the halving, compounded by reduced base block rewards and transaction fee revenues.
In response to financial pressures, Bitcoin miners have accelerated the movement of coins out of their on-chain wallets, indicating increased selling of BTC reserves. CryptoQuant highlights that daily miner outflows have surged to levels not seen since late May.
The combined sell-off by miners, large Bitcoin holders (whales), and governmental entities has contributed to Bitcoin’s recent price decline observed throughout June. This downturn has also affected the “hash price,” a metric gauging miner profitability per unit of computational power. Currently, average mining revenues per hash are hovering around $0.049 per EH/s, slightly above the record low of $0.045 recorded on May 1.
These developments underscore ongoing volatility and financial adjustments within the Bitcoin mining sector, potentially laying the groundwork for renewed market dynamics as miners navigate profitability challenges amidst evolving market conditions.
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