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Bitcoin miners are approaching a critical phase known as “capitulation” as their profits plummet amidst a significant sell-off in the Bitcoin market.
CryptoQuant, a market intelligence firm, recently noted in a post on X that metrics measuring miner capitulation are nearing levels seen during the market bottom after the FTX crash in late 2022, indicating a potential bottom for Bitcoin.
Capitulation occurs when miners scale back their operations or sell off part of their mined Bitcoin and reserves to maintain operations, earn yield, or hedge against Bitcoin exposure. Over the past month, CryptoQuant analysts have spotted several signs of capitulation alongside a 13% drop in Bitcoin’s price from $68,791 to $59,603.
Bitcoin Hashrate Declines
A key indicator of capitulation is the decline in Bitcoin’s hashrate, which measures the total computational power securing the Bitcoin network. The hashrate has fallen by 7.7%, reaching a four-month low of 576 EH/s after hitting a record high on April 27. This decline mirrors conditions post-FTX collapse in December 2022, suggesting a potential market bottom.
Notably, the recent 7.7% drawdown in hashrate is similar to the decline seen in late 2022, when Bitcoin’s price bottomed at $15,500 before surging over 300% in the following 15 months.
The CryptoQuant report highlights the challenges faced by miners since the halving. Miners’ daily revenues have dropped by 63% since the halving, with both Bitcoin’s base block rewards and transaction fee revenue previously being higher. Daily revenues have fallen from $79 million on March 6 to $29 million currently. Additionally, revenue from transaction fees now accounts for only 3.2% of total daily revenues, the lowest share since April 8. Consequently, miners have been forced to tap into their reserves to earn additional yield, with daily miner outflows reaching the highest volume since May 21.
Bitcoin Price Drops Amid Sell-Off
The ongoing sell-off by miners, combined with sales from Bitcoin whales and national governments, has contributed to the recent price pullback in Bitcoin. On July 5, Bitcoin hit a four-month low of $53,499. This decline has also impacted miners’ profitability, measured by the “hash price,” which represents the mining revenue per unit of computational power. Currently, the average mining revenue per hash is $0.049 per EH/s, slightly above the all-time low of $0.045 recorded on May 1.
As reported, the total market capitalization of the 14 U.S.-listed Bitcoin miners reached an all-time high of $22.8 billion on June 15. Last month, Bitcoin mining stocks surged after U.S. presidential candidate Donald Trump promised to boost mining operations within the country, emphasizing the potential for the U.S. to become energy dominant.
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