Indicators of Miner Capitulation
Bitcoin miners are currently facing a critical phase known as “capitulation,” as their profits diminish following massive sell-offs in the Bitcoin market. Market intelligence firm CryptoQuant recently revealed that metrics measuring miner capitulation are nearing levels observed during the market bottom following the FTX crash in late 2022. Bitcoin’s price bottomed at $15,500 before surging over 300% in the subsequent 15 months.
This suggests a potential bottom for Bitcoin as miners reduce their operations or sell portions of their mined Bitcoin to sustain themselves. Over the past month, CryptoQuant analysts have noted several signs of capitulation following a 13% drop in Bitcoin’s price, falling from $68,791 to $59,603.
One significant indicator of capitulation is the decline in Bitcoin’s hashrate (the total computational power securing the network). The hashrate has experienced a 7.7% decrease, hitting a four-month low of 576 EH/s after reaching a record high on April 27.
Financial Strain on Miners
The challenges for miners have intensified since the halving, with daily revenues plummeting by 63%, dwindling from $79 million to $29 million, according to CryptoQuant’s data. Additionally, revenue from transaction fees now accounts for only 3.2% of total daily revenues, the lowest share since April 8. This financial strain has forced miners to tap into their reserves to earn additional yield, with daily miner outflows reaching the highest volume since May 21.
Impact on the Bitcoin Market
The continuous sell-off by miners and sales from large holders and governments have contributed to the recent price decline in Bitcoin. On July 5, Bitcoin dropped to a four-month low of $53,499. This price drop has further impacted miner profitability.
The average mining revenue per hash is $0.049 per EH/s, slightly above the all-time low of $0.045 recorded on May 1. Despite these challenges, there are some positive developments.
The total market capitalization of the 14 U.S.-listed Bitcoin miners reached an all-time high of $22.8 billion on June 15. Additionally, Bitcoin mining stocks experienced significant gains following a promise by US presidential candidate Donald Trump to boost mining operations within the country.
Bit Digital and Iris Energy’s Declining BTC Output
Meanwhile, the Bitcoin mining company Bit Digital reported a significant increase in its hash rate, reaching 2.57 exahashes per second (EH/s) by the end of June. This represents a notable rise from the 2.54 EH/s recorded in May and the 1.78 EH/s recorded earlier in June 2023.
Despite the increase in hash rate, the firm’s BTC production decreased. Bit Digital produced 61.7 BTC in June, a 2.5% drop from May’s 63.3 BTC and April’s 119.3 BTC. However, Bit Digital reported revenue from other activities.
The company earned aggregate staking rewards of approximately 49.8 ETH and an annual percentage yield (APY) of 3.5% on Ethereum staking. Furthermore, Bit Digital brought in $4.1 million from its Bit Digital AI contract, showcasing its diversification into other revenue streams.
Iris Energy’s Output
Similarly, Iris Energy’s performance report in June showed a slight increase in Bitcoin production compared to May. The firm mined 233 BTC in June, up from 230 BTC in May but down from 358 BTC in April.
Also, the mining revenue for June was $15,490, up from $15,079 in May. Despite these fluctuations in BTC production, Iris Energy’s hash rate has seen a notable increase over the year.
The firm’s average operating hash rate in June was 9,316 petahashes per second (PH/s), down from 9,414 PH/s in May but up from 5,587 PH/s in June 2023. The slight decrease in Bit Digital’s hash rate from May to June was due to a combination of factors. Such factors included the company’s participation in an energy-saving program (4CP), selling excess power, responding to emergency service requests (ERS), and setting up new equipment.