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A prolonged period of mining capitulation approaches conclusion, indicating a possible bottom for BTC prices.
Hash Ribbon recovery and sub production pricing indicate that the most severe phase of the bitcoin drawdown may have been surpassed.
Hash Ribbon (Glassnode)
Key points:
- The Hash Ribbon is nearing a recovery signal after three months of miner distress, a trend that has historically correlated with local or significant bitcoin lows.
- BTC is presently trading below its average production cost for the first time since November 2022, a price point frequently linked with substantial value and late-stage capitulation.
The most severe part of bitcoin’s 50% drawdown might already be in the past.
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The Hash Ribbon metric is approaching a signal that indicates the conclusion of a three-month miner capitulation, marking one of the longest capitulations recorded, per Glassnode data.
This indicator evaluates the 30-day and 60-day moving averages of hash rate, based on the premise that bitcoin typically reaches a bottom when miners experience maximum financial strain. Capitulation happens when mining revenue falls below operational costs, forcing less efficient miners to cease operations and liquidate BTC reserves to cover electricity, debt, and overhead expenses. This scenario decreases hash rate and creates lasting sell pressure on the market.
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A recovery indicator is activated when the 30-day hash rate moving average surpasses the 60-day, signaling that miners are coming back online and network stress is diminishing, which is imminent. Historically, when this crossover coincides with improving price trends, it has identified strong accumulation zones.
Since late November, when the metric first inverted, bitcoin has decreased from approximately $90,000 to a low of around $60,000 in early February, before recovering to about $65,000 at the time of publication.
Such significant corrections are common during miner stress phases. Since 2011, there have been roughly 20 mining capitulations, most occurring alongside local or major lows, including January 2015, December 2018, and December 2022.
The hash rate, representing the total computational power securing the network, is currently on the rise, indicating renewed confidence among miners.
Concurrently, bitcoin is trading below its estimated average production cost of $66,000, a level often associated with substantial value, as per checkonchain data. The last instance of this was in November 2022, when BTC reached a low near $15,500.
