Bitcoin Miners 'Near Capitulation' As BTC Sells Along With Profits Drying Up!
Usually during every bitcoin halving the reward of bitcoin miners is halved. Events like the FTX crash happened two years ago which caused Bitcoin miner capitulation metrics to reach the same level as the market bottom after the FTX crash. With such FTX crashes at the time we saw a possible downfall for BTC at that time. Currently we have seen events like an FTX crash which caused the market to go down.
The term miner capitulation refers to Bitcoin miners who essentially adopt a process whereby they either reduce their activity or sell the Bitcoins they hold. Basically some miners slow down their operations or sell a portion of their mined bitcoins and reserve them to stay afloat. In this way they achieve a certain result or hedge their bitcoin exposure by reducing their activity or by selling the bitcoins they hold.
When events like the FTX crash occurred two years ago, Bitcoin typically reflected the level of miner capitulation with a 7.7% hashrate drop. Of course, we know that cryptos are notorious for volatility. So such a decline often signals a potential market bottom. While reflecting the equivalent decline in hashrate two years ago, Bitcoin price experienced a huge increase over the next year or so, almost tripling, but before this increase, Bitcoin price fell to around $15,500. As we can see currently and the price of Bitcoin is constantly decreasing. However, miners are currently grossly underpaid, as evidenced by the Mining Profit/Loss Sustainability Index. We currently know that behind the market crash Mt. Gox includes events such as transferring bitcoins to an unknown address and selling them.
However, the reward for Bitcoin miners has dropped significantly, which is now more than half of what it was last March. Total daily revenue has dropped from $79M in March to $29M currently Even with that, the revenue from the transaction fees fell to just 3.2% of the total daily revenue, the lowest since last 3-4 months. As Bitcoin miners are currently rewarded with much lower rewards or reduced revenue, they are forced to use their reserves to generate yield. Even their daily mining outflow has increased to a maximum. As a result they are advised to sell their BTC reserves. However, if the current price of Bitcoin continues to decline and the price of Bitcoin approaches $40,000, the plight of the mining industry will increase and at the same time some of the world's largest mining companies will be forced to surrender.
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Great article from you, I really understand why miners would have to consider selling some reserves to stay afloat given the current market condition, one can only hope this steady decline in price halts and reverses to the upside for the sake of miners and investors alike.