Bitcoin miners ‘closer to capital’ as profits dry up alongside BTC selloff

According to market data firm CryptoQuant, Bitcoin mining capital metrics are reaching market lows after the FTX collapse in late 2022, indicating a potential low for BTC.

Mining is the process by which some miners reduce their operations or sell their mined Bitcoins to stay afloat or “get production” or limit their Bitcoin exposure.

CryptoQuant analysts have highlighted a number of capital signs that have emerged over the past month, during which Bitcoin's price has dropped 13% from $68,791 to $59,603.

One of these signs is a significant decline in the Bitcoin hashrate – the total amount of computing power the Bitcoin network needs – which hit a record-high hashrate in April, down 7.7% from a four-month low of 576 EH/s on 27.

“Bitcoin Miner capitulation to December 2022 levels with 7.7% hashrate drop, similar to post-FTX crash conditions. Such declines usually indicate market volatility.

Specifically, the 7.7% reduction mirrored in 2016. By the end of 2022, Bitcoin's price will fall below $15,500, with a decline of more than 300% in the next 15 months, indicating a decrease in hash rate.

The CryptoQuant report notes that for most of the period since the halving, miners have been “extremely underpaid” as seen by the Mining Profit/Loss Sustainability Indicator.

As a result, miners have seen a 63% drop in their daily earnings since both Bitcoin's base rewards and transaction fee income have been halved since its peak.

“Total daily earnings are down from $79M on March 6 to $29M now. Additionally, transaction fees revenue fell to just 3.2% of total daily revenue, the lowest share since April 8.

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Due to reduced revenue, Bitcoin miners have been forced to use their resources for production. CryptoQuant reported that daily miner flows have increased to the highest level since May 21st, suggesting that they may be selling their BTC holdings.

Although they did not peak (double the 1-year average), spending flows increased in May (red circles). A higher flow of bitcoins suggests that miners may sell off.

This selling by miners, along with sales by Bitcoin whales and national governments, contributed to Bitcoin's recent price rebound, which saw BTC hit a four-month low of $53,499 on July 5.

The decline has affected Bitcoin's “hash price,” a measure of the profitability of mining per unit of computing power. Currently, the average mining revenue per hash is $0.049 per EH/s, up from a low of $0.045 reached on May 1. .

According to an earlier report by financial services firm Cantor Fitzgerald, if Bitcoin's market price falls to $40,000, underscoring the problems facing the mining industry, some of the world's largest mining companies will be forced to buy.

This article does not contain investment advice or recommendations. Every investment and business activity involves risk, and readers should do their own research when making a decision.