Bitcoin Miner Capitulation is in full effect, how long will it last?
The collapse of the crypto exchange FTX causes a historic event in the Bitcoin market. Yesterday, chain data signaled the second wave of a Bitcoin miner capitulation in a cycle.
Historically, miners have had a massive impact on the BTC price. The now announced miner capitulation will put further selling pressure on the Bitcoin price, which is experiencing a historically bad November, down 21%.
On-chain data shows that the second wave of miner capitulation has now begun, suggesting further pain for the BTC price. As analyst Dylan LeClair wrote, the Bitcoin hash rate is starting to tilt here.
Bitcoin miners underwater
The 7-day moving average hashrate is now 13.7% away from its all-time high. Mining difficulty is expected to adjust by around -9% in a week, which will take some pressure off the miners, at least in the short term.
Nevertheless, miner margins have been and continue to be massively squeezed since June, the first capitulation event of this cycle. Despite this, the hash rate rose to an all-time high until recently.
This, the increased mining difficulty and the FTX-related price crash have pushed the hashish price to its lowest level since late 2020.
As Capriole Investments’ Charles Edwards noted yesterday, hashish tapes have confirmed the start of the capitulation. “Triggered by the $10 billion FTX scam and subsequent collapse, bitcoin miners are now going broke and the hash rate is on the decline,” Edwards said.
In the “Bitcoin miner net position change” chart, it can be seen that miners have been selling aggressively for the past month.
“Combined with the hashrate decline and today’s hashband bearish cross, this suggests that we are indeed in a phase of miner capitulation,” so Will Clemente of Reflexivity Research.
How long will the miner capitulation last?
Something to keep in mind is that miner capitulation is usually the last phase of a Bitcoin bear market. In the 2018 cycle, the BTC hash rate continued to rise as the price reached the $6000 mark until the final miner capitulation came at $3000.
In the current cycle, miners have already undergone a capitulation in June. They reduced their holdings by 4,000 BTC, equivalent to around $68 million, in the last two weeks.
Before that, they had only started a net accumulation trend in September 2022, betting that the bottom had been reached. However, they bet on the wrong horse and are now severely punished.
Historically, the miner capitulation has lasted an average of 48 days, which would put an end to the miner selling pressure in sight by mid-January 2023.
However, the last capitulation ended only after two months, on 18 August. The end marked the third longest capitulation in history. Bitcoin bulls should therefore be cautious in December and January, watching the behavior of Bitcoin miners.
At press time, BTC saw a small uptick and was trading at $16,481.
