Bitcoin miners are grappling with significant hurdles as they attempt to avoid capitulation. Despite Bitcoin’s recent price recovery, the situation remains precarious for many miners. CryptoQuant’s founder, Ki Young Ju, has highlighted that miner capitulation is still ongoing, signaling continued struggle within the industry.
What is Miner Capitulation?
Miner capitulation occurs when cryptocurrency miners are forced to sell off their Bitcoin reserves due to declining prices and transaction fees, which reduce their profitability. Historical data shows that such capitulation phases tend to end when the daily average mining value drops to 40% of the annual average. Currently, this rate is at 72%, indicating that miners are still under significant pressure.
According to recent data from Blockchain.com, Bitcoin’s network computational power, measured by hashrate, has fallen from a peak of 657 EH/s to 552 EH/s. This decline suggests that many miners are shutting down their operations due to unfavorable market conditions.
How is the Market Responding?
CryptoQuant noted that significant drops in hashrate have historically indicated bottoming processes, potentially hinting at a market recovery. However, Ju warned that the market might experience a “boring” period with minimal price movement in the coming months. He advised market participants to avoid excessive risks and hold long-term bullish positions.
Key Takeaways for Miners
– Monitor the daily average mining value in relation to the annual average to anticipate the end of capitulation phases.
– Be aware of the hashrate trends as they can signal potential market bottoms.
– Consider long-term strategies and avoid taking excessive risks during periods of minimal price movement.
Despite the challenges, Bitcoin’s price has shown resilience. After falling below $54,000 last week, Bitcoin regained strength, partly due to strong inflows into Bitcoin exchange-traded funds (ETFs), which saw a net inflow of $216.4 million on July 9. At the time of writing, Bitcoin was trading at $59,064, peaking at $59,322.