Bitcoin Mining Industry Capitulation Could Signal Bottom Is Near, CryptoQuant Says

According to recent data from CryptoQuant, the Bitcoin mining industry is showing signs of “capitulation,” a potential indicator that Bitcoin could be approaching a local price floor before hitting new highs. The market intelligence platform’s Wednesday report analyzed indicators related to miners, who secure the Bitcoin network in exchange for newly minted BTC.

A significant sign of capitulation is the notable drop in Bitcoin’s hash rate, which represents the total computing power securing the network. After hitting a record high of 623 exahashes per second (EH/s) on April 27, the hash rate has since dropped 7.7% to 576 EH/s, its lowest level in four months.

Historically, such a drop in hash rate has been linked to conditions where the Bitcoin price bottomed out. For example, a similar 7.7% drop in hash rate occurred in December 2022, when the Bitcoin price hit $16,000 before increasing by over 300% over the next 15 months.

This recent drop in hash rate follows Bitcoin’s fourth cyclical “halving” event in April, which halved the number of coins paid to miners. According to CryptoQuant’s Miner Profit/Loss Sustainability Indicator, the halving has left many miners “extremely underpaid” since April 20, forcing them to shut down unprofitable miners. As a result, daily mining revenue has fallen 63% since the halving, when Bitcoin’s base block rewards and transaction fee revenue were significantly higher.

Amid these financial pressures, Bitcoin miners have been moving coins out of their on-chain wallets at an accelerated pace, suggesting they may be selling their BTC stash. CryptoQuant noted that daily miner outflows have reached their highest volume since May 21.

This massive selloff by miners, along with sales by Bitcoin whales and national governments, contributed to the recent pullback in Bitcoin’s price in June. The decline also impacted Bitcoin’s “hashrate,” a measure of miner profitability per unit of computing power. Currently, the average mining revenue per hashrate stands at $0.049 per EH/s, just above the all-time low of $0.045 reached on May 1.