CryptoQuant reports that blockchain data indicates signs of Bitcoin mining capitulation, which could be a precursor to Bitcoin hitting a local price bottom before soaring to new highs.
CryptoQuant analyzed metrics from miners, who are responsible for securing the Bitcoin network in exchange for newly minted Bitcoin. According to a report from the market intelligence platform on Wednesday, several signs of capitulation occurred last month, during which Bitcoin’s price dropped 13% from $68,791 to $59,603.
One of the signs includes a significant decline in Bitcoin’s hash rate, which is the total computational power ensuring the security of Bitcoin. Since reaching a historic high of 623 exahashes per second on April 27, the hash rate has dropped by 7.7% to 576 EH/s, the lowest number in four months.
CryptoQuant stated, “Historically, an extreme drop in the hash rate is associated with price bottoms.” Specifically, the 7.7% decline reminds people of the hash rate drop in December 2022 when Bitcoin’s price fell to $16,000 and then surged over 300% in the following 15 months.
This latest drop in the hash rate occurred after Bitcoin’s fourth periodic “halving” event in April, which halved the number of coins paid to miners. According to CryptoQuant’s miner profitability sustainability index, this has resulted in miners experiencing “extremely low rewards” since April 20, forcing many to shut down their now unprofitable mining machines.
CrypotoQuant states that since the halving, miners’ daily revenue has declined by 63%, as both the basic block rewards and transaction fee income for Bitcoin were much higher.
During this period, Bitcoin miners have been moving coins out of their on-chain wallets at a faster rate than usual, indicating that they may be selling their Bitcoin reserves. The company stated, “The daily miner outflow has surged to the highest level since May 21.”
Between Bitcoin miners, whales, and government selling, the price decline in June has also impacted Bitcoin’s “hash price,” which measures the profitability of Bitcoin miners per unit of computational power.
CryptoQuant stated, “The average mining revenue calculated by the hash price continues to approach historical lows.” “The hash price is $0.049 per EH/s, slightly higher than the historical low of $0.045 reached on May 1.”
Edited by Ryan Ozawa.