It is no secret that Bitcoin miners are currently experiencing significant financial stress, especially after the end of the fourth halving. As a result, these key network participants are forced to dispose of their BTC holdings to offset rising operating costs.
Interestingly, the latest on-chain data shows that the Bitcoin market is experiencing a wave of capitulations from miners that is reminiscent of December 2022, just a month after the FTX crash. The question now is — what happened last time and how might it impact the current cycle?
Is BTC ready to resume its bull run?
In the recent write to XCryptoQuant’s head of research, Julio Moreno, revealed that Bitcoin miner capitulation has reached levels comparable to December 2022. December 2022 also represented the bottom of the previous cycle following the collapse of FTX.
The collapse of the Sam Bankman-Fried-led exchange marked the lowest point for the cryptocurrency industry, triggering widespread panic and selling. Ultimately, this massive selling pressure caused the price of Bitcoin to plummet.
At the time, the capitulation among Bitcoin miners was characterized by a 7.6% drop in Network True Hashrate. According to Julio Moreno’s post on X, the decline in actual network hashrate is also currently -7.6%.
A chart showing BTC's Network True Hashrate Drawdown and price | Source: jjcmoreno/X
The Network True Hashrate Drawdown metric calculates the reduction in computing power devoted to mining Bitcoin, reflecting the struggles of miners to keep operations afloat in a financially dire situation. Naturally, a significant drop in Network True Hashrate and the associated capitulation of miners have several potential impacts on the price of Bitcoin.
As seen over the past few weeks, this could lead to increased selling pressure as miners look to sell their Owning BTC. This could put grave downward pressure on the price of Bitcoin, lowering its value.
At the same time, periods of significant miners’ capitulation have historically preceded market rebounds. Moreover, as highlighted in the post, the Bitcoin market hit a cycle bottom the last time (December 2022) the Network True Hashrate Drawdown was at this point. This suggests that BTC may really be primed for an imminent price rebound.
Bitcoin price in brief
At the time of writing, BTC is trading around $60,889, up 0.2% in the last 24 hours. The leading cryptocurrency continues to be deep in the red on the weekly time frame, with a decline of over 5% over the past week.
The price of BTC on the verge of $62,000 on the daily timeframe | Source: BTCUSDT chart on TradingView
Featured image from iStock, chart from TradingView
