Bitcoin Miner Capitulation Drops to FTX Collapse Thresholds
Bitcoin miners are currently experiencing a significant phenomenon known as “capitulation,” prompting them to seek innovative ways to generate additional revenue. This situation arises when miners are compelled to cease operations due to unprofitability or unsustainable costs. It occurs when the expenses associated with mining, such as electricity, hardware, and operational costs, surpass the income derived from mining the leading cryptocurrency.
Recent data from CryptoQuant indicates a 7.6% decline in Bitcoin mining hashrate this month, reaching levels reminiscent of the FTX exchange collapse in December 2022. Unlike the previous instance, this drop follows Bitcoin’s recent halving, reducing miner rewards to 3.125 BTC. Miners are also contending with diminishing revenues from alternative sources as network activity decreases. Initially, they benefited from high fees during the post-halving frenzy of the Bitcoin-based Runes protocol. However, earnings have sharply decreased due to the slowdown in network activity.
As of June 29, daily Rune transactions have plummeted from over 753,000 on April 23 to 21,861, marking a substantial 90% decline. Consequently, total earnings from Rune transactions for miners have fallen below 2 BTC in the past week, down from over 1000 BTC on April 20.
To diversify their 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. This strategic shift indicates miners’ recognition of the potential profitability in AI ventures amidst evolving market dynamics.
On the other hand, Marathon Digital, the largest BTC mining company, has announced its foray into mining Kaspa, a PoW project. The firm disclosed that it has mined 93 million KAS, valued at approximately $15 million as of June 25.
In response to these economic pressures, miners are scaling back their operations and have intensified selling activities this month. Recent reports revealed that miners have sold approximately 30,000 BTC, totaling $2 billion.
In conclusion, the cryptocurrency mining landscape is undergoing significant transformations as miners navigate economic challenges and seek innovative avenues for sustaining profitability.
