Network hashrate drops by 20%.

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The post-halving Bitcoin world continues to challenge. After a acute escalate in hashrate due to the April reduction in block rewards, Bitcoin’s computing power dropped sharply, has fallen by 20% in recent weeks.

The unexpected decline sparked debate among analysts, with some guessing a acute selloff and others advising caution.

Source: BitInfo Charts

Bitcoin: Hashrate hiccup or miners’ exodus?

Hashrate, a measure of the total computing power dedicated to securing the Bitcoin network, typically increases after a halving as miners invest in more powerful platforms to compete for reduced rewards.

However, this time the trend exceeded expectations. Experts like Maartunn, a pseudonymous analyst at CryptoQuant, believe this is a signal: potential “capitulation of miners”.

Less proficient miners are probably giving up now. The halving, which cut block rewards in half, reduced the profit margins of miners using older hardware. When miners stop operating, the hashrate drops.

Bitcoin is currently trading at $66,306. Chart: TradingView

Hash Ribbon Flash Warning Sign

Maartunn’s theory is supported by a technical indicator called Hash Ribbons. This metric tracks the difference between short-term and long-term average hashrates. As the gap widens, it suggests a decline in mining activity, potentially due to less proficient miners leaving.

The recent decline in hashrate has caused Hash Ribbons prices to skyrocket, historically a sign of miners capitulating that has often coincided with price lows Bitcoin.

Source: CryptoQuant

Bitcoin miners selling out?

Further fueling the surrender theory is the reduction in Bitcoin’s mining reserve. This metric tracks the amount of Bitcoin stored in wallets associated with miners. The decline in reserves suggests that miners may be withdrawing from mined coins, potentially to cover operating costs or exit the market altogether.

Signal of undervaluation or cyclical decline?

Maartunn interprets these signs as a bullish indicator. He argues that Hash Ribbons often indicate favorable times to buy. Supporting his claim is the market value to realized value (MVRV) ratio, which suggests that Bitcoin may be undervalued.

24-hour BTC price action. Source: Coingecko

This indicator compares the current market price with the average price at which all Bitcoins were purchased. A negative MVRV, such as what Bitcoin currently has, suggests that the asset is trading below its historical cost basis, potentially indicating a buying opportunity.

Not everyone is on the surrender train

However, not all analysts are convinced by this. Some say the hashrate drop may be fleeting, perhaps due to factors such as extreme weather events disrupting mining activities in some regions.

Additionally, the post-halving period is typically an adjustment period for miners, and short-term hashrate fluctuations do not necessarily signal a mass exodus.

The post-halving Bitcoin landscape is still developing. While the decline in hashrate and other signs suggest a potential buying opportunity, especially for long-term investors, the situation remains fluid.

Featured image from Shutterstock, chart from TradingView


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