The collapse of the FTX crypto exchange triggers a historic event in the Bitcoin market. Yesterday, on-chain data signaled the second wave of a Bitcoin miner capitulation in one cycle.
Historically, miners have had a huge impact on the BTC price. The now-announced miner capitulation will put further selling pressure on the Bitcoin price, which is experiencing a historically bad November, falling 21%.
On-chain data shows that the second wave of miner capitulation has now begun, pointing to further pain for the BTC price. As analyst Dylan LeClair wrote, Bitcoin hash rate is starting to tip here.
Bitcoin miners underwater
The 7-day moving average hash rate is now 13.7% away from its all-time high. The mining difficulty is expected to be adjusted by about -9% within a week, which will relieve some of the burden on miners, at least in the short term.
Nevertheless, miners’ margins have been and continue to be under tremendous pressure since June, the first capitulation event in this cycle. Despite this, the hash rate still rose to an all-time high until recently.
This, increased mining difficulties and the FTX-related price crash have pushed the hashish price to its lowest level since late 2020.
As Charles Edwards of Capriole Investments noted yesterday, hash ribbons have confirmed the beginning of the capitulation. “Triggered by the $10 billion FTX scam and subsequent collapse, bitcoin miners are now going out of business and the hash rate is dropping,” Edwards stated.
The “Bitcoin miner net position change” chart shows that miners have sold aggressively over the past month.
“Combined with the drop in hash rate and the current hash band bear cross, this suggests that we are indeed in a phase of miner capitulation,” said Will Clemente of Reflexivity Research.
How long will miner capitulation last?
Something to keep in mind is that miner capitulation is usually the final stage of a Bitcoin bear market. In the 2018 cycle, the BTC hashrate continued to rise as the price hit the $6,000 mark until the final miner cap hit $3,000.
In the current cycle, miners have already capitulated in June. They reduced their holdings by 4,000 BTC, equivalent to approximately $68 million, in the past two weeks.
Before that, they had only started a net accumulation trend in September 2022, guessing that the bottom had been reached. However, they bet on the wrong horse and are now severely punished.
Historically, miner capitulation has lasted an average of 48 days, which would end miner selling pressure by mid-January 2023.
However, the most recent capitulation only ended after two months, on August 18. The end marked the third-longest capitulation in history. Bitcoin bulls should therefore be cautious in December and January and watch the behavior of Bitcoin miners.
At the time of writing, BTC has seen a slight rebound and is trading at USD 16,481.