Bitcoin Mining Difficulty Drop Suggests BTC Price Is Nearing Bottom

Bitcoin
miners
have
been
struggling
lately—though
past
data
shows
that
could
be
a
bullish
signal
for
Bitcoin’s
price.

Since
its
peak
in
late
May,
Bitcoin’s
total
hash
rate
has
declined
from
658
exahashes
per
second
(EH/s)
to
556
EH/s
on
June
28,
according
to
Hashrate
Index.
Hash
rate
is
a
measure
of
the
total
effort
being
used
by
miners
to
secure
the
Bitcoin
network,
and
is
by
extension
a
measure
of
how
competitive
it
is
to
mine.

In
response,
the
Bitcoin
network
has
automatically
adjusted
its
block-mining
difficulty
down
7.8%
this
weekend
from
83.68
terahashes
per
second
(TH/s)
to
79.50
TH/s.

ADVERTISEMENT

Drops
of
that
size
are
few
and
far
between
in
Bitcoin’s
history.
In
fact,
the
last
time
a
pullback
in
both
hash
rate
and
network
difficulty
of
this
magnitude
occurred
was
after
the
collapse
of
FTX
in
December
2022—a
period
when
multiple
major
mining
companies
defaulted
on
their
debts,
and
Bitcoin’s
price
finally
bottomed
after
a
year-long
bear
market.

“Miner
capitulation
is
still
ongoing,”

tweeted
CryptoQuant
CEO
Ki
Young
Ju
on
Tuesday.
“Historically,
it
ends
when
the
daily
average
mined
value
is
40%
of
the
yearly
average;
it’s
now
at
72%.”

In
a
report
last
week,
CryptoQuant
noted
that
“miner
capitulation”
has
in
the
past
been
associated
with
a
bottom
in
Bitcoin
prices.
That
means
a
careful
observation
of
miner
health
could
be
key
for
traders
looking
to
enter
the
market
at
the
right
time.

Since
miners
earn
their
revenue
in
BTC,
their
income
is
largely
dependent
on
the
market
price
of
Bitcoin
itself.
As
such,
Bitcoin’s
substantial
price
pullback
since
March
has
crunched
the
mining
industry’s
income
at
large.

The
main
pain
point
for
miners,
however,
has
been
April’s
Bitcoin
halving.

“Bitcoin
miner
reserves
decreased
by
roughly
20k
BTC
since
June,”
Vincent
Maliepaard,
marketing
director
at
IntoTheBlock,
told

Decrypt.
“The
Bitcoin
halving
two
months
ago
might
be
a
driver
behind
the
recent
miner
sell-off
as
margins
have
decreased
since
then.”

Over
the
last
three
months,
Bitcoin’s
“hashprice”—a
measure
of
mining
industry
profitability
per
unit
of
mining
work
performed—has
plummeted
to
all-time
lows.

According
to
Compass
Mining,
periods
of
such
depressed
profitability
generally
continue
for
6
to
12
months
after
a
halving
event.
Such
periods
make
a
good
time
for
mining
companies
to
upgrade
their
computer
fleets
to
use
the
most
efficient
mining
hardware
available.

“Large
public
miners
are
still
actively
purchasing
the
latest
generation
miners
to
drive
fleet
efficiency,
economies
of
scale,
gross
margin,
and
ultimately
their
stock
price,”
said
CJ
Burnett,
chief
revenue
officer
at
Compass
Mining,
to

Decrypt.

Edited
by
Ryan
Ozawa.