Bitcoin Miners Face ‘Capitulation’ as Profits Diminish Amid BTC Sell-Off
Bitcoin miners are currently in a critical stage referred to as “capitulation” as their profits decrease due to a sell-off in the Bitcoin market. Market intelligence firm CryptoQuant recently disclosed that the metrics measuring miner capitulation are approaching the levels seen during the market bottom after the FTX crash in late 2022, suggesting that Bitcoin may be reaching a potential bottom.
Miner capitulation occurs when miners scale back their operations or sell some of their mined Bitcoin and reserves to sustain their operations, generate yield, or hedge their Bitcoin exposure. In the past month, CryptoQuant analysts have identified several signs of capitulation coinciding with a 13% decline in Bitcoin’s price from $68,791 to $59,603.
One significant indicator of capitulation is the decrease in Bitcoin’s hashrate, which represents the total computational power securing the Bitcoin network. The hashrate has experienced a substantial 7.7% decline, reaching a four-month low of 576 EH/s after hitting a record high on April 27. The similarity between this decline and the conditions following the post-FTX collapse in December 2022 suggests a potential market bottom.
It is worth noting that the recent 7.7% decline in hashrate is comparable to the drop witnessed in late 2022 when Bitcoin’s price hit a bottom of $15,500 before experiencing a remarkable surge of over 300% in the following 15 months.
The CryptoQuant report also highlights the challenges faced by miners since the halving. Miners have been significantly underpaid during this period, as indicated by the miner profit/loss sustainability indicator. Their daily revenues have dropped by 63% since the halving, when both Bitcoin’s base block rewards and transaction fee revenue were higher. Total daily revenues have dwindled from $79 million on March 6 to $29 million currently. Additionally, the revenue generated from transaction fees now accounts for only 3.2% of the total daily revenues, marking the lowest share since April 8.
As a result, Bitcoin miners have been forced to tap into their reserves to earn additional yield. CryptoQuant’s data shows a surge in daily miner outflows, reaching the highest volume since May 21, suggesting that miners may be selling their BTC reserves.
The recent sell-off by miners, combined with sales from Bitcoin whales and national governments, has contributed to the recent price decline in Bitcoin. On July 5, Bitcoin dropped to a four-month low of $53,499. This decline has also affected the profitability of miners, as measured by the “hash price,” which represents the miner profitability per unit of computational power. Currently, the average mining revenue per hash is $0.049 per EH/s, slightly higher than the all-time low of $0.045 recorded on May 1.
It was previously reported that 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 experienced significant gains following a promise by United States presidential candidate Donald Trump to enhance mining operations in the country. Trump expressed his desire for all remaining Bitcoin to be produced in the United States, highlighting the potential for the country to become energy dominant.
