Record Hash Rates and Miner Capitulation Point to Possible Bitcoin Price Bottom
Date: 2024-08-14 Author: Henry Casey Categories: CRYPTO PAYMENTS
Bitcoin miners are increasing their capacity again despite the fall in BTC prices, which reached $49,000. This happened after the capitulation, when the number of bitcoins withdrawn reached 19,000 BTC on August 5, which was the highest since March 18. According to analytics company CryptoQuant, such behavior by miners may indicate a possible local price bottom for Bitcoin.
This week, the Bitcoin network hash rate reached a new all-time high of 627 exahashes per second. This happened after an 8.5% decline in early July. This hashrate growth comes even as the price of Bitcoin falls and mining profitability hits record lows, reflecting positive expectations among miners after the sell-off of the past few months.
Hashrate, or network computing power, is the amount of computation performed by miners to mine new Bitcoins and confirm transactions on the network. Mining, as a process, requires solving millions of problems every second to “win” a new block.
CryptoQuant notes: “Last week, there was likely a capitulation among miners when Bitcoin withdrawals spiked after the price reached $49,000. Daily miner withdrawals reached 19,000 BTC on August 5, the highest since March 18.”
Miners are those who provide computing power to any blockchain network in exchange for rewards in the form of BTC tokens. They typically sell some of their bitcoins to maintain operations, as the cost of running such systems is high: in early July, when prices were at $54,000, only five popular mining rigs were profitable.
“Miners sold some of their bitcoins as their average operating profit fell to 25%, the lowest since January 22,” CryptoQuant added.
Miners typically capitulate around local Bitcoin price lows during bull markets. Since 2023, miners have seen a surge in withdrawals coinciding with local lows in March 2023 after the collapse of Silicon Valley Bank and in January 2024 after the price correction caused by the launch of a Bitcoin ETF in the US.
As of Wednesday afternoon in Asia, Bitcoin is trading just above $61,000, up 2.8% in the last 24 hours and leading the major cryptocurrencies.
