By Norah ODonnell
Bitcoin (BTC) miners are facing a crucial phase called ‘capitulation’ as their profits drop amidst a sell-off in the Bitcoin space.
In a recent post on X, market Intelligence Company CryptoQuant highlighted that the metrics that measure miner capitulation are nearing the levels only seen during the market bottom after the FTX crash in late 2022, meaning the potential bottom for Bitcoin has come.
Miner capitulation happens whenever miners reduce their operations or sell some of their mined Bitcoin and reserves to help sustain their operations, earn significant yields or hedge their Bitcoin exposure. In the past month, CryptoQuant analysts have identified many signs of capitulation coinciding with a 13% drop in Bitcoin’s value from $68,791 to $59,603.
Bitcoin Hashrate Drops
One notable indicator of capitulation is the drop in Bitcoin’s hashrate, which represents the cumulative computational power securing the Bitcoin network. The hashrate has recorded a massive 7.7% drop, reaching a four-month low of 576 EH/s after it hit a record high on April 27.
The resemblance between this drop and the post-FTX collapse conditions in December 2022 points to a possible market bottom.
It is worth noting that the 7.7% plunge in hashrate seen recently is comparable to the drop seen in late 2022. The drop happened when Bitcoin’s value bottomed at $15,500 before it experienced an impressive rise of at least 300% in the 15 months that followed.
The CryptoQuant report also highlights the challenges faced by miners since the Bitcoin halving event. Miners have been considerably underpaid in this period, as highlighted by the miner profit/loss sustainability indicator.
Their daily revenues have dropped by 63% since the halving, where both Bitcoin’s base block rewards and transaction fee revenue were significantly higher. The total daily revenues have dropped from $79 million on March 6 to $29 million currently.
Furthermore, the revenue generated from transaction fees now accounts for a mere 3.2% of the total daily revenues, marking the lowest share since April 8. In that context, Bitcoin miners have been compelled to tap into their reserves to earn some extra yield.
CryptoQuant’s data highlights an increase in daily miner outflows, hitting the highest volume since May 21, which means miners might be selling their BTC reserves.
Bitcoin Price Plunges Amid Sell-Off
The current sell-off by the miners, together with sales from Bitcoin whales and national governments, has contributed considerably to the recent price drop in Bitcoin. On July 5, Bitcoin dropped to a four-month low of $53,499.
This steep drop has also affected the profitability of the miners, as measured by the “hash price,” which seems to represent the miner profitability per unit of computational power.
Currently, the average mining revenue per hash is $0.049 per EH/s, a bit higher than the all-time low of $0.045 recorded on May 1. As highlighted, the total market cap of the 14 U.S.-listed Bitcoin miners hit an all-time high of $22.8 billion on June 15.
In June, Bitcoin mining stocks experienced considerable gains after a promise by United States presidential candidate Donald Trump to enhance mining operations within the nation.
At the time, Trump insisted on his desire for all remaining Bitcoin to be produced in the United States, highlighting the potential for the nation to become energy-dominant.