On-chain data reveals that bitcoin miners could be close to their capitulation after selling the most substantial chunk of BTC holdings for the past several months. As such, the asset’s price could be headed for another short-term dip to “well below” $20,000, CryptoQuant warned.
Bitcoin Miners Capitulating?
The company’s Miners Reserve chart shows the general behavior of BTC miners, and, as the graph below demonstrates, they sold a significant portion of their holdings in the past few weeks. This came after accumulating for over a year following the previous such sell-off at the start of 2021.
However, there’s one substantial difference between the two sell-offs. Back in January 2021, miners were most likely taking profits as bitcoin soared to a new all-time high of roughly $30,000. Now, though, the landscape is different since the asset is down by about 70% since its latest peak in November 2021.
According to CryptoQuant, the latest correction, exacerbated in June, which turned out to be the asset’s worst trading month in a decade, “forced” miners to sell their BTC at current market prices to “minimize the potential losses and lower their overall risk.”
Concluding that miners are now in a distribution phase, the analytics resource warned that this growing selling pressure caused by the capitulation event “could push the price even lower in the short-term and bitcoin could drop well below the $20K mark in the near future.”
Bitcoin Price vs. Miners’ Holdings. Source: CryptoQuant
Miners’ Suffering, Declining Hash Rate
The market-wide retracement, perhaps fueled by the Terra collapse in May, the 3AC, Celsius, BlockFi fiasco in June, and the overall economic turmoil, pushed BTC south hard in the past few months, leading to drops below $20,000.
Miners, the backbone of the world’s largest cryptocurrency, had to sell some of their portions, as mentioned above. In fact, one report claimed that they disposed of all of their outputs in May, while several other miners did the same in June as well.
Yet, that was not enough for companies like Compass Mining, which had to lay off 15% of its headcount just a few weeks after two of its C-level execs left the firm.
The mining landscape got another hit from weather conditions in different US states. Marathon Digital’s mining operations in Montana were hurt after a massive storm, while several miners based in Texas had to stop working due to rising temperatures.
Overall, the hash rate has declined by 25% since its peak charted a few weeks ago and now is down to 190 Ehash/s.