Bitcoin miners are currently facing significant “capitulation,” pushing them to innovate for additional revenues.

Bitcoin miner capitulation occurs when miners are forced to shut down due to unprofitability or unsustainable operating costs. This can happen when the cost of mining (including electricity, hardware, and operational expenses) exceeds the revenue generated from mining the bellwether asset.

Bitcoin Miners Face Economic Pressures Amid Capitulation

Data from CryptoQuant shows a 7.6% drop in Bitcoin mining hashrate this month, now resembling levels last seen during the FTX exchange collapse in December 2022. Unlike that period, today’s decline follows Bitcoin’s recent halving, cutting miner rewards to 3.125 BTC.

Miners are also grappling with reduced revenues from alternative sources as network activity diminishes. Initially, they benefitted from high fees during the Bitcoin-based Runes protocol frenzy post-halving. However, earnings have sharply declined as network activity slowed.

As of June 29, daily Rune transactions have plummeted from a peak of over 753,000 on April 23 to 21,861, marking a drastic 90% decrease. Consequently, total miners’ earnings from Rune transactions have fallen below 2 BTC in the past week, down from a peak of over 1000 BTC on April 20.

Read more: Making Passive Income From Crypto Mining: How to Get Started

Facing these economic pressures, miners are powering down their machines and have intensified selling activities this month. Last week, BeInCrypto reported that miners had offloaded approximately 30,000 BTC, valued at $2 billion.

To further diversify revenue streams, miners are increasingly turning to artificial intelligence (AI) and other Proof-of-Work (PoW) assets. Companies like Core Scientific and Hut 8 have secured significant funding for AI expansion. Matthew Sigel, VanEck’s head of digital research, reported that Morgan Stanley’s Head of Sustainability Research, Stephen Byrd, explained that these moves show that miners see potential profitability in AI ventures amid evolving market dynamics.

“I do respect the idea that Bitcoin mining could become more profitable. There’s a game theory here…the more people who exit Bitcoin mining and become data centers, the more attractive it is for those who remain,” Byrd reportedly said.

Read more: Top Cryptocurrency Mining Pools To Join 2024

On the other hand, Marathon Digital, the largest BTC mining company, has announced its entry into mining Kaspa, a PoW project. The firm stated that it has mined 93 million KAS, valued at approximately $15 million as of June 25.

It is no secret that Bitcoin miners are currently experiencing significant financial stress, especially following the completion of the fourth halving event. As a result, these vital network participants are being forced to offload their BTC holdings to offset the increasing operational costs.

Interestingly, the latest on-chain data shows that the Bitcoin market is experiencing a wave of capitulation from miners that is reminiscent of December 2022, barely a month after the FTX collapse. The question now is — what happened the last time and how could it impact the current cycle?

Is BTC Ready To Resume Its Bull Run?

In a recent post on X, CryptoQuant’s head of research Julio Moreno revealed that the Bitcoin miner capitulation has hit levels comparable to December 2022. December 2022 also represented the bottom of the previous cycle after the collapse of FTX.

The fall of the Sam Bankman-Fried-led exchange marked a low point for the crypto industry, triggering widespread panic and sell-offs. Ultimately, this enormous selling pressure potentiated a sharp decline in the price of Bitcoin.

At the time, the capitulation among the Bitcoin miners was characterized by a 7.6% drawdown in the Network True Hashrate. According to Julio Moreno’s post on X, the Network True Hashrate Drawdown is also currently at -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 the computational power dedicated to mining Bitcoin, reflecting miners’ struggles to maintain operations in a tight financial condition. Naturally, the significant drawdown in the Network True Hashrate and the associated miner capitulation have several potential impacts on the Bitcoin price.

As seen over the past few weeks, these can lead to an increase in selling pressure, as miners look to sell their BTC holdings. This could put serious downward pressure on the price of Bitcoin, driving its value to lower levels.

At the same time, periods of significant miner capitulation have historically preceded market recoveries. Moreover, as highlighted in the post, the Bitcoin market reached the cycle bottom the last time (December 2022) the Network True Hashrate Drawdown was at this point. This suggests that BTC could really be primed for a price rebound soon. 

Bitcoin Price At A Glance

As of this writing, the price of BTC stands around $60,889, reflecting a 0.2% increase in the past 24 hours. The premier cryptocurrency is still deep in the red on the weekly timeframe, with an over 5% decline in 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

The Bitcoin price has been under significant bearish pressure in the past few weeks, and this crypto researcher has explained the role of demand in the market correction.

BTC Apparent Demand Is Falling – Cause For Alarm?

In a recent post on the X platform, CryptoQuant’s head of research Julio Moreno explained how the latest Bitcoin price correction is linked to the falling Bitcoin demand. This analysis is based on the Bitcoin apparent demand metric on the CryptoQuant platform.

Apparent demand calculation is often used in financial markets to evaluate demand by comparing production levels and inventory changes. Basically, this metric provides a clear picture of whether demand is rising or falling.

In the case of cryptocurrencies, like Bitcoin, apparent demand is calculated by utilizing the concept of inactive supply. This concept tracks the amount of Bitcoin that has not been moved or transferred over a certain period.

As Moreno highlighted, the chart below uses the 1-year inactive supply as a “proxy for inventory.” This implies that it monitors the amount of BTC that has not been moved or transacted for over a year.

Chart showing BTC apparent demand and price | Source: jjcmoreno/X

According to data from CryptoQuant, approximately 23,000 BTC have flowed out of the 1-year inactive supply in the last 30 days. This suggests a decline in Bitcoin demand, as it seems long-term investors are opting to offload and move their Bitcoin.

This decrease in demand has several implications, specifically on the value of the premier cryptocurrency. For instance, the CryptoQuant head of research noted that the low demand is one of the catalysts of the recent price correction.

The influx of significant BTC amounts from long-term holders to the market increases the available supply, thereby putting downward pressure on the prices. Moreover, price dips can result when the market’s buying pressure is insufficient to soak up the additional supply.

CryptoQuant revealed in a weekly report that the Bitcoin demand has significantly declined compared to Q1 — following the launch of the US spot exchange-traded funds. As prices are currently down, it appears that an increase in BTC demand can potentiate the resumption of the current bull run. 

Bitcoin Price At A Glance

As of this writing, the Bitcoin price stands around $60,790, reflecting a 1.6% decline in the past week. According to data from CoinGecko, the market leader is down by nearly 6% in the past week.

The price of BTC thickens around the $60,000 mark on the daily timeframe | Source: BTCUSDT chart on TradingView

Featured image from iStock, chart from TradingView