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Mining

Here’s why miner capitulation is actually good news for Bitcoin

Xeggex

Bitcoin’s extremely risky price has devastated nearly all of the crypto market and is now dragging miners down with it. While typically thought of the muse of the Bitcoin community and its most resilient gamers, miners are affected by quickly reducing revenue margins.

Bitcoin mining problem at the moment stands at simply 1% beneath its all-time excessive and is squeezing a big share of miners out of the community. Mining profitability is about to achieve one in all its lowest factors, as mining income per terra hash dropped beneath $5,000 at first of September.

btc miner revenue
Graph displaying miner income per terra hash (Source: Glassnode)

Faced with elevated mining problem and reducing profitability, miners had been pressured to promote their Bitcoin holdings en masse. Miners bought over 12,000 BTC since July when the whole Bitcoin provide held in miner addresses reached its peak of 1.84 million BTC.

Data from Glassnode has proven {that a} related capitulation occurred in November 2021 when Bitcoin reached its all-time excessive. At the time, miners bought round 30,000 BTC. If miners observe the same sample all through the autumn, we might see a fair larger sell-off within the coming weeks.

btc miner net position change
Graph displaying the 30-day change of the Bitcoin provide held in miner addresses (Source: Glassnode)

While hash ribbons present that the worst of the capitulation is over, shrinking miner balances paint a distinct image.

btc balance miner wallets
Graph displaying the Bitcoin steadiness in miner wallets (Source: Glassnode)

However, the large sell-off we’ve seen previously two months would possibly actually be good for Bitcoin in the long term. While brutal, fluctuations in mining profitability purge the community from unprofitable operations and weak miners unable to bear the volatility. When the market stabilizes, the Bitcoin community shall be left standing on the shoulders of probably the most resilient and most worthwhile miners — strengthening it for future cycles and volatility.

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