Bitcoin miners are currently experiencing a phase of capitulation as the network shows signs of decreased activity. This phase is characterized by miners either stopping their operations or selling off some of their Bitcoin holdings. Interestingly, this type of capitulation has historically been associated with a bottoming out of Bitcoin prices, followed by an eventual uptrend in the asset’s value.
One key indicator of this miner capitulation is the 7.7% drop in the network hash rate since its peak on April 27. This decline, as reported by CryptoQuant, suggests that less efficient miners may have shut down their equipment due to the negative profitability of their operations. The miner profit/loss sustainability indicator also shows that miners have been underpaid since April 20, with daily revenues dropping by 63% from $79 million on March 6th to $29 million currently. Transaction fees now make up just 3.2% of total revenue, the lowest share since April 8.
Furthermore, the average mining revenue per hash is close to all-time lows at $0.049 per EH/s, slightly above the record low of $0.045 reached on May 1. In addition, miners have been moving Bitcoin out of their wallets at higher rates, with daily outflows reaching their highest volume since May 21, indicating a possible increase in selling activity.
This current phase of miner capitulation is reminiscent of a similar 7.7% hash rate decline observed in December 2022, which marked the bottom cycle following the FTX collapse. Historically, such significant declines in hash rate have been associated with price-bottom conditions.
There are signs that the current situation may be the darkest before the dawn for Bitcoin. The asset is currently trading at a significant discount on Coinbase, which could be an indication that it is preparing for an upward movement. David Lawant, Falcon’s head of research, noted that the last time the Coinbase premium was this negative, it was followed by a major rally from October 2023 to March 2024. This suggests that the current discount on Coinbase could be a precursor to a much-needed rally in Bitcoin’s price.
In conclusion, the current phase of miner capitulation in the Bitcoin network, coupled with the discounted trading price on Coinbase, may signal that the asset is gearing up for a potential rally in the near future. Investors and traders should keep a close eye on these developments as they could have significant implications for the future price movements of Bitcoin.