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According to a report by CryptoQuant, there are indications of Bitcoin miner capitulation, which may suggest a potential bottom for Bitcoin prices.
Miner capitulation occurs when certain miners cease operations or liquidate parts of their Bitcoin reserves, usually due to financial pressures that are no longer sustainable. Historically, this phenomenon has frequently aligned with notable price bottoms for Bitcoin.
What Are the Signs of Miner Capitulation?
The CryptoQuant report points out a significant drop in the Bitcoin network’s hashrate following the recent halving event. The hashrate, which reflects the total computational power dedicated to mining Bitcoin, has decreased by 7.7%.
This represents the largest decline since December 2022, a time characterized by the collapse of the FTX exchange and the corresponding Bitcoin cycle bottom. A declining hashrate suggests that some miners are ceasing their operations due to diminished profitability.
Financial Strain on Miners
CryptoQuant indicates that Bitcoin miners are currently facing considerable financial challenges. The combination of lower Bitcoin prices, diminished block rewards after the halving, and a drop in transaction fees has resulted in miners being significantly undercompensated. This financial strain compels miners to contemplate shutting down their operations or liquidating their Bitcoin holdings to manage expenses.
As of June 19, 2024, Bitcoin miner reserves have fallen to their lowest level in over 14 years, reaching 1.90 million BTC, according to CryptoQuant data. This notable decrease marks the lowest point since February 2010, illustrating a trend where miners are retaining less Bitcoin on their balance sheets.
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With profitability waning, miners have been transferring Bitcoin out of their wallets at an increasing rate. Daily miner outflows have risen to their highest levels since May 21.
This trend indicates that some miners are liquidating their Bitcoin reserves. Furthermore, certain large mining firms have begun to utilize their reserves to generate yield or hedge against Bitcoin exposure, reflecting a strategic shift driven by financial necessity.
The average mining revenue per hash, commonly referred to as hashprice, remains close to all-time low levels. This metric is vital for miners as it directly impacts their revenue based on the computational power they contribute to the network. Persistently low hashprice levels further intensify the financial challenges faced by miners, pushing more towards capitulation.
Consequences for Bitcoin Prices
The indications of miner capitulation noted in the CryptoQuant report imply that the Bitcoin market may be nearing a bottom. Historically, miner capitulation has often preceded price bottoms in Bitcoin cycles.
When miners, typically regarded as strong holders of Bitcoin, are compelled to sell their reserves, it can lead to a significant decrease in selling pressure once the capitulation phase concludes. This alleviation of selling pressure can pave the way for a price recovery.
Current signs of miner capitulation, including a declining hashrate, underpayment of miners, increased Bitcoin outflows, and low hashprice levels, indicate a pivotal moment for Bitcoin prices.
The post Bitcoin Network Shows Signs of Miner Capitulation: CryptoQuant appeared first on Cryptonews.
