The Bitcoin network is currently displaying signs of miner capitulation. This phase is characterized by miners either shutting down their operations or selling off a portion of their Bitcoin reserves. Following the recent halving, the network hash rate has decreased by 7.7% from its peak on April 27. This decline indicates that less efficient miners may have switched off their equipment due to negative profitability.
Data from CryptoQuant’s miner profit/loss sustainability indicator reveals that miners have been experiencing significant underpayment since April 20, which was the day after the 2024 Bitcoin halving event took place. Daily revenues have dropped by 63%, going from $79 million on March 6th to $29 million currently. Transaction fees now make up only 3.2% of the total revenue, the lowest percentage since April 8. The average mining revenue per hash (hash price) has also reached alarming lows, sitting at $0.049 per EH/s, slightly above the record low of $0.045 set on May 1.
Another key indicator of miner capitulation is the rise in Bitcoin outflows from miner wallets. Daily outflows have surged to their highest levels since May 21, signaling a potential increase in selling activity among miners. This trend mirrors a similar 7.7% hash rate drop seen in December 2022, which was followed by a bottom cycle in the wake of the FTX collapse.
Historically, significant declines in hash rate have often coincided with price-bottom conditions in Bitcoin. The current situation where Bitcoin is trading at a notable discount on Coinbase further supports the notion that the asset may be gearing up for an upward movement. Falcon’s head of research, David Lawant, has drawn parallels between the current market conditions and past instances where a negative Coinbase premium preceded a substantial rally from October 2023 to March 2024. This discounted price could potentially signal the start of a much-needed rally in the near future.
The signs of miner capitulation in the Bitcoin network are becoming increasingly apparent, with various metrics pointing towards financial struggles and increased selling among miners. While this phase may lead to short-term price pressures, history indicates that it could also pave the way for a price reversal and the beginning of a new uptrend in the cryptocurrency market.