According to market intelligence firm CryptoQuant, Bitcoin miner capitulation metrics are approaching the same level as the market bottom following the FTX crash in late 2022, signaling a possible bottom for BTC.
Miner capitulation is a process in which some miners reduce their operations or sell a portion of their mined Bitcoin and reserves to stay afloat or” earn yield or hedge their Bitcoin exposure.”
CryptoQuant analysts highlighted multiple signs of capitulation that emerged over the last month, during which time Bitcoin’s price dropped 13% from $68,791 to $59,603.
One of those signs is a significant decline in Bitcoin’s hashrate – the total computational power that secures the Bitcoin network – which has experienced a 7.7% decline to hit a four-month low of 576 EH/s after hitting a record-high hashrate on April 27.
“Bitcoin Miner capitulation mirrors December 2022 levels with a 7.7% hashrate drop, similar to post-FTX collapse conditions. Such declines often signal potential market bottoms.”
Notably, the 7.7% drawdown mirrors an equivalent decline in hashrate in late 2022, when Bitcoin’s price bottomed at $15,500 before surging more than 300% over the next 15 months.
The CryptoQuant report also noted that for most of the period since the halving, miners have been “extremely underpaid,” as evidenced by the miner profit/loss sustainability indicator.
As a result, miners have seen a 63% decline in daily revenues since the halving when both Bitcoin’s base block rewards and transaction fee revenue were higher.
“Total daily revenues have decreased from $79M on March 6 to $29M currently. Moreover, the revenue from transaction fees has fallen to only 3.2% of the total daily revenues, the lowest share since April 8.”
Due to decreased revenues, Bitcoin miners have been forced to use their reserves to earn yield. CryptoQuant noted that daily miner outflows have spiked to the highest volume since May 21, suggesting they may be selling their BTC reserves.
“Outflows also spiked during May (red circles), although they did not reach extreme levels (two times the 1-year average). Higher Bitcoin outflows suggest miners could be selling.”
This sell-off by miners, along with sales from Bitcoin whales and national governments, has contributed to Bitcoin’s recent price pullback, which saw BTC fall to a four-month low of $53,499 on July 5.
The decline has also impacted Bitcoin’s "hash price,” a measure of miner profitability per unit of computational power. Currently, the average mining revenue by hash is $0.049 per EH/s, just above the all-time low of $0.045 reached on May 1.
According to an earlier report by financial services firm Cantor Fitzgerald, some of the world’s biggest mining companies would be forced to capitulate if the market price of Bitcoin plummets to $40,000, highlighting the predicament of the mining industry.