Bitcoin Miner Capitulation and Surge in Hashrate Suggest Potential Price Reversal: Analysis
Bitcoin miners have shown resilience by increasing their network hashrate despite a recent dip in bitcoin prices, reflecting a positive sentiment following a miner capitulation event, which historically signals price bottoms.
The miner capitulation was evident as Bitcoin outflows spiked to 19,000 BTC on August 5, the highest level since March 18, coinciding with bitcoin’s price touching $49,000. This surge in outflows suggested that miners were selling off to cover expenses as profit margins became tighter.
According to on-chain analysis firm CryptoQuant, Bitcoin miners are now expanding their capacity as the network hashrate hit a new all-time high this week after the recent capitulation event. The network hashrate reached 627 exahash per second on Tuesday, rebounding from an 8.5% decline in early July. This expansion is noteworthy given the recent drop in bitcoin prices and record-low hash price, indicating a positive outlook among miners post a period of selling activity in recent months.
Hashrate represents the computational power utilized by miners to create new bitcoin and validate transactions on the Bitcoin network. Mining involves solving millions of calculations per second to secure new blocks.
“We may have observed a miner capitulation event last week with a spike in miner outflows after prices hit $49,000,” noted CryptoQuant. “Bitcoin daily miner outflows surged to 19K BTC on August 5, marking the highest level since March 18.”
Miners play a crucial role in blockchain networks by providing computing power in exchange for BTC rewards. To sustain their operations, miners often sell bitcoin continuously, especially when operational profit margins are under pressure. Notably, only a handful of mining rigs were profitable in early July when bitcoin prices hovered around $54,000.
The occurrence of a miner capitulation event typically coincides with local price bottoms for Bitcoin during bullish market phases. Historical data shows that spikes in miner outflows aligned with market bottoms in March 2023 following the Silicon Valley bank sell-off and in January 2024 after the bitcoin spot ETF launch in the U.S.
Bitcoin is currently trading slightly above $61,000 in Asian trading hours on Wednesday, marking a 2.8% increase in the past 24 hours, leading the gains among major cryptocurrencies.
