After the halving, the world of Bitcoin continues to show changes. After its hashrate surged last April to celebrate block reward reductions, Bitcoin’s computational power has plummeted, falling 20% in recent weeks.
Related Reading
This unexpected decline has sparked debate among analysts, with some noticing explosive sales and others urging caution.
Bitcoin: Hashrate Hiccup or Miner Exodus?
The hash rate, which measures the integrated processing power dedicated to securing the Bitcoin network, typically rises after a halving event as miners invest in more powerful equipment to compete for the reduced rewards.
But this time the trend defied expectations. Experts like Maartunn, an anonymous analyst at CryptoQuant, believe this is a sign of a potential “miner capitulation.”
Less efficient miners are now likely to throw in the towel. Halving, which cuts block rewards in half, has squeezed the profit margins of miners using older equipment. When these miners stop working, the hash rate drops.
Hash Ribbon Flash Warning Sign
Supporting Maartunn’s theory is a technical indicator called Hash Ribbons. This indicator tracks the difference between short-term and long-term hashrate averages. A growing gap means a decline in mining activity, potentially due to the exodus of less efficient miners.
The recent hash rate plunge has sparked a surge in Hash Ribbons. This is a sign of miner capitulation, which often coincides with historically low prices for Bitcoin.
Are Bitcoin Miners Selling?
Further supporting the capitulation theory is the decline in Bitcoin miner holdings. This indicator tracks the amount of Bitcoin held in wallets associated with miners. Declining reserves mean miners can potentially offload mined coins to cover operating costs or exit the market altogether.
Is this a sign of undervaluation or a cyclical decline?
Maartunn interprets these signs as bullish indicators. Hash ribbons often indicate a good moment to buy, he argues. Supporting his claim is the MVRV (Market Value to Realized Value) ratio, which suggests that Bitcoin may be undervalued.
This indicator compares the current market price to the average price at which all Bitcoins were acquired. Currently, a negative MVRV, such as Bitcoin, means the asset is trading below its historical cost basis, potentially indicating a buying opportunity.
Related Reading
Not everyone is aboard the surrender train.
But not all analysts agree. Some argue that hashrate declines may be temporary due to factors such as extreme weather events disrupting mining operations in certain regions.
Additionally, the period following the halving is generally one of adjustment for miners, and short-term hashrate fluctuations may not necessarily mean a large-scale exodus.
The post-halving Bitcoin landscape is still unfolding. The hashrate decline and other signs point to a potential buying opportunity, especially for long-term investors, but the situation remains fluid.
Featured image from Shutterstock, chart from TradingView