The Bitcoin network is currently experiencing a significant decrease in hashrate, a key metric that measures the relative computing power of the network. This drawdown in hashrate is now at its lowest levels since December 2022, a period that immediately followed the collapse of FTX during the previous bear market. Data from CryptoQuant indicates that the True Bitcoin Hashrate Drawdown currently sits at -7.6%, suggesting a possible bottom for the value of Bitcoin.
Various indicators, such as Bitcoin Exchange Reserve, the Miners Position Index (MPI), and Bitcoin Miner Reserve, all point towards minimal selling pressure, further supporting the argument for a market bottom. Miner capitulation has been observed in recent weeks, presenting potential buying opportunities for Bitcoin investors.
Charles Edwards, the founder of the crypto hedge fund Capriole, highlighted the significance of the Bitcoin Hash Ribbons indicator as it signaled a buy opportunity due to the slowdown in network computational power. The Hash Ribbons indicator compares the 60-day moving average of the Bitcoin hashrate with a 30-day average, with a sinking 30-day average indicating a decline in hash power.
Market analyst Willy Woo added to this sentiment by suggesting that new market highs may not be reached until weaker miners are compelled to halt their operations—an occurrence typically seen after a halving event but delayed in the current cycle. Recent data showed a substantial decrease in Bitcoin miner withdrawals post-halving, indicating reduced selling pressure from miners and signaling a potential upward trajectory for Bitcoin’s price.
Looking at the aftermath of the April 2024 halving, Cantor Fitzgerald’s report emphasized the challenges miners are confronting following the reduction in block rewards. The report singled out 11 mining companies, such as Marathon Digital, Hut8, and Argo Blockchain, as potentially facing profitability issues due to high operational costs and diminished rewards. If the price of Bitcoin were to drop to $40,000, the report suggested that several major mining companies could be compelled to capitulate, underscoring the challenges faced by the mining industry post-halving.