Bitcoin Miners Encounter ‘Capitulation’ as Earnings Decline During BTC Market Decline

Bitcoin miners are currently undergoing a pivotal stage referred to as “capitulation” as their earnings decline amid a market sell-off of Bitcoin.

In a recent update on X, the market intelligence company CryptoQuant disclosed that the indicators reflecting miner capitulation are approaching the levels seen during the market low following the FTX collapse in late 2022, implying a possible bottom for Bitcoin.

Miner capitulation happens when miners scale back their operations or liquidate a portion of their mined Bitcoin and reserves to maintain their activities, generate yield, or mitigate their Bitcoin exposure.

Over the last month, analysts at CryptoQuant have noted multiple signs of capitulation coinciding with a 13% decrease in Bitcoin’s price from $68,791 to $59,603.

#Bitcoin Miner capitulation mirrors Dec 2022 levels with a 7.7% hashrate drop, similar to post-FTX collapse conditions.

Such declines often signal potential market bottoms. pic.twitter.com/OZ3PnDdKKf

— CryptoQuant.com (@cryptoquant_com) July 5, 2024

Bitcoin Hashrate Declines

A key indicator of capitulation is the reduction in Bitcoin’s hashrate, which signifies the total computational power securing the Bitcoin network.

The hashrate has seen a notable 7.7% drop, reaching a four-month low of 576 EH/s after achieving a record high on April 27.

The resemblance of this decline to the conditions following the FTX collapse in December 2022 suggests a potential market bottom.

It is important to highlight that the recent 7.7% decrease in hashrate is similar to the drop experienced in late 2022, when Bitcoin’s price reached a low of $15,500 before undergoing a remarkable increase of over 300% in the following 15 months.

The CryptoQuant report also emphasizes the difficulties miners have encountered since the halving.

Miners have been considerably undercompensated during this timeframe, as indicated by the miner profit/loss sustainability metric.

Their daily revenues have fallen by 63% since the halving, during which both Bitcoin’s base block rewards and transaction fee income were higher.

The total daily revenues have decreased from $79 million on March 6 to $29 million currently.

Moreover, the revenue from transaction fees now constitutes only 3.2% of the total daily revenues, marking the lowest proportion since April 8.

As a result, Bitcoin miners have been forced to utilize their reserves to generate additional yield.

Data from CryptoQuant indicates a surge in daily miner outflows, reaching the highest volume since May 21, suggesting that miners may be liquidating their BTC reserves.

Bitcoin Price Drops Amid Sell Off

The ongoing sell-off by miners, along with sales from Bitcoin whales and national governments, has played a role in the recent price decline of Bitcoin.

On July 5, Bitcoin fell to a four-month low of $53,499.

This drop has also affected the profitability of miners, as indicated by the “hash price,” which reflects miner profitability per unit of computational power.

Currently, the average mining revenue per hash is $0.049 per EH/s, slightly above the all-time low of $0.045 recorded on May 1.

As previously reported, the total market capitalization of the 14 U.S.-listed Bitcoin miners reached an all-time high of $22.8 billion on June 15.

Last month, Bitcoin mining stocks saw substantial gains following a commitment by United States presidential candidate Donald Trump to enhance mining operations within the nation.

At that time, Trump articulated his ambition for all remaining Bitcoin to be mined in the United States, highlighting the potential for the country to achieve energy dominance.

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