Public Bitcoin miners show we can expect another capitulation
Determining the market bottom requires a lot of guesswork. Bitcoin’s recent volatility is the result of various factors ranging from geopolitical uncertainty and local regulation to internal implosions of the crypto market.
Miners have historically been one of the most reliable predictors of Bitcoin’s performance.
Bitcoin miners form the foundation of the crypto market and create strong resistance levels that reduce volatility. As one of the largest holders of BTC, miners can swing the market by holding their coins and liquidating them.
Analyzing the state of the market requires analyzing the state of Bitcoin miners.
As previously covered by CryptoSlate, some of the most solid indicators of miner health have been hash bands.
Hash bands indicate when miners capitulate and show the divergence between the 30-day moving average and 60-day moving average of the Bitcoin hash rate; that miners are capitulating shows that Bitcoin has become too expensive to mine — ie, Bitcoin’s market price is too low to cover the cost of electricity required to produce it.
According to hashband, the worst capitulation of the miner is usually over when the 30-day MA of the Bitcoin hash rate crosses above the 60-day MA. Since the beginning of the year, we’ve seen three separate instances of this switch, shown in dark red on the graph below.
Data analyzed by CryptoSlate showed that severe miner capitulation began in mid-June this year and lasted until mid-August. The data is supported by crossing the hash bands illustrated in the graph above.
Looking at BTC holdings from the 9 largest listed Bitcoin miners further supports this trend. Several major miners created heavy selling pressure between May and June, liquidating around 8,765 BTC.
And while selling pressure appears to have stabilized month-on-month since June, quarterly data paints a much different picture.
The top 9 public Bitcoin miners saw their holdings decrease from 125,171 BTC in Q2 to 102,407 in Q3.
The figures shown in the table above fell further in October. Earlier this month, Core Scientific liquidated over 1,000 BTC it held in September and reported that it only had 24 BTC on October 26.
With mining difficulty and the hash rate at its highest level, miners are under pressure in terms of income and resources. The average hash rate has grown every quarter in 2022 and is expected to increase at an even higher rate as the fourth quarter ends.
Data analyzed by CryptoSlate showed that Bitcoin’s fall in the second half of the year caused a noticeable decrease in miner income.
Bitcoin’s price volatility, falling revenues and declining BTC holdings have also affected the stock market. Shares of all publicly traded Bitcoin miners have been on a sharp decline since their peak in October 2021. Core Scientific leads the way, with CORZ down nearly 90% over the past year, with Argo Blockchain and BitDigital close behind with an 88% drop.
With the hash rate expected to grow further and no end in sight to the bear market, we could see the ongoing miner capitulation continue until the end of the year. And while data shows that miners have left the dark red zone and are either flatlining or consolidating, the worse is not over. If current conditions continue, we could see another miner capitulation before the end of the year, creating additional selling pressure that could swing the sensitive market further.
