According to market intelligence firm CryptoQuant, the Bitcoin Miner Capitulation Indicator is approaching levels that were at the same level as the market bottom following the FTX crash in late 2022, suggesting that BTC may have bottomed.
Miner capitulation is the process by which some miners reduce their operations or sell some of their mined bitcoins and reserves to shore up or “take profits or hedge their bitcoin exposure.”
CryptoQuant analysts highlighted several signs of capitulation over the past month, with the Bitcoin price dropping 13% from $68,791 to $59,603.
One such signal is the significant decline in the Bitcoin hashrate (the total computational power securing the Bitcoin network). The hashrate has fallen 7.7% since reaching its all-time high on April 27, hitting a four-month low of 576 EH/s.
“The Bitcoin miner capitulation saw a 7.7% hashrate drop, similar to what happened after the FTX crash, reflecting December 2022 levels. Such drops often signal a potential market bottom.”
What’s notable is that the 7.7% decline coincides with an equal decline in hashrate in late 2022, when the Bitcoin price bottomed at $15,500 before surging more than 300% over the next 15 months.
The CryptoQuant report also noted that for most of the period following the halving, miners were paid “extremely low wages,” as evidenced by the Miner Profit/Loss Sustainability metric.
As a result, miners saw their daily profits drop by 63% following the halving, when both Bitcoin’s base block reward and transaction fee revenue were higher.
“Total daily revenue has fallen from $79 million on March 6 to $29 million today. Additionally, transaction fee revenue has fallen to 3.2% of total daily revenue, the lowest percentage since April 8.”
Related: Up to 99% of Mt. Gox’s $8.2 Billion Bitcoin Could Be Sold – Analyst
The decline in revenue has forced Bitcoin miners to use their reserves to generate revenue. CryptoQuant noted that daily miner outflows have surged to their highest volume since May 21, suggesting they may be selling their BTC holdings.
“Although outflows spiked in May (red circles), they did not reach extreme levels (double the yearly average). The higher Bitcoin outflows suggest that miners may be selling.”
The recent Bitcoin price crash, triggered by miner sell-offs, Bitcoin whales, and national governments, brought BTC down to a four-month low of $53,499 on July 5.
The decline has also affected Bitcoin’s “hash price,” which is a measure of miner profitability per unit of computational power. The average mining profit per hash is currently $0.049 per EH/s, slightly above the all-time low of $0.045 recorded on May 1.
A previous report from financial services firm Cantor Fitzgerald highlighted the plight of the mining industry, saying that a Bitcoin market price crash to $40,000 would force some of the world’s largest mining companies to capitulate.
This article does not contain any investment advice or recommendations. All investment and trading moves involve risk, and readers should conduct their own research when making decisions.