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Public Bitcoin miners show we can expect a second capitulation


Determining the market bottom requires a lot of guesswork. Bitcoin’s recent volatility has resulted from various factors ranging from geopolitical uncertainty and local regulation to internal implosions of the crypto market.

Miners have historically been one of the most reliable omens of Bitcoin’s performance.

Bitcoin miners make up the foundation of the crypto market and create strong resistance levels that reduce volatility. As one of the largest holders of BTC, miners can swing the market by holding their coins and liquidating them.

Analyzing the state of the market requires analyzing the state of Bitcoin miners.

As previously covered by CryptoSlate, some of the most solid indicators of miner health have been hash ribbons.

Hash ribbons indicate when miners capitulate, showing the divergence between the 30-day moving average and the 60-day moving average of the Bitcoin hash rate; having miners capitulate shows that Bitcoin has become too expensive to mine — i.e., Bitcoin’s market price is too low to cover the cost of electricity required to produce it.

According to hash ribbons, the worst of the miner capitulation is usually over when the 30-day MA of the Bitcoin hash rate crosses above the 60-day MA. Since the beginning of the year, we’ve seen three separate instances of this switch, shown in dark red on the graph below.

bitcoin miners hash ribbons capitulation
Graph showing the Bitcoin hash ribbon indicator from January 2022 to October 2022 (Source: Glassnode)

Data analyzed by CryptoSlate showed that severe miner capitulation began mid-June this year and lasted until mid-August. The data is supported by crossing the hash ribbons illustrated in the graph above.

Looking at BTC holdings from the top 9 largest publicly listed Bitcoin mining companies further supports this trend. Several large miners created heavy selling pressure between May and June, liquidating around 8,765 BTC.

And while the selling pressure seems to have steadied on a month-to-month basis since June, quarterly data paints a much different picture.

The top 9 public Bitcoin miners saw their holdings decrease from 125,171 BTC in the second quarter to 102,407 in the third quarter.

bitcoin miners holdings capitulation
Table showing the BTC holdings of the top 9 largest publicly listed Bitcoin mining companies from January 2022 to September 2022

The numbers shown in the table above decreased even further in October. Earlier this month, Core Scientific liquidated over 1,000 BTC it held in September and reported holding just 24 BTC on October 26.

With mining difficulty and the hash rate at their all-time high, miners are getting squeezed in terms of their revenue and resources. The average hash rate has been growing each quarter in 2022 and is expected to increase at an even higher rate as the fourth quarter ends.

bitcoin miner hash rate capitulation
Table showing the average hash rate for the top seven public Bitcoin miners in 2022

Data analyzed by CryptoSlate showed that Bitcoin’s drop in the year’s second half caused a notable reduction in miner revenue.

miner revenue per exahash capitulation
Graph showing Bitcoin miner revenue per exahash from 2011 to 2022 (Source: Glassnode)

Bitcoin’s price volatility, dropping revenue, and decreasing BTC holdings have also affected the stock market. The shares of all publicly listed Bitcoin mining companies have been on a sharp drop since peaking in October 2021. Core Scientific leads the way, with CORZ down almost 90% in the past year, with Argo Blockchain and BitDigital close behind with an 88% drop.

bitcoin miner stock price capitulation
Graph showing the stock price of publicly-listed Bitcoin mining companies from October 2021 to October 2022 (Source: TradingView)

With the hash rate expected to grow even further and no end in sight to the bear market, we could see the ongoing miner capitulation continue until the end of the year. And while data shows that miners have exited the dark red zone and are either flatlining or consolidating, the worse isn’t over. If current conditions continue, we could see another miner capitulation before the end of the year, creating additional selling pressure that could further swing the sensitive market.

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