Analyst Says Miner Capitulation Continues, Expect Choppy Crypto Markets

  • Miner capitulation occurs when profitability for mining Bitcoin falls to the point that some miners have to exit the scene and liquidate assets. 
  • The Bitcoin halving can play a major role in this, as the blockchain event literally halves profitability for each block successfully verified.
  • Analyst Ki Young Ju believes market rebounds can occur when the daily mining yield is 40% of the annual average. 
  • Currently, miners are receiving approximately 72% of the annual daily average, suggesting choppy waters for the coming months.

What is Miner Capitulation?

The term miner capitulation sounds a bit scary – but is a fairly normal cycle for the Bitcoin network. The theory is simple. As the profitability of mining BTC drops, whether due to rising electricity prices or falling BTC value, certain miners are forced away from the industry. 

As a result, miners may sell Bitcoin kept in reserves to stay afloat, putting downward pressure on BTC’s price. The theoretical fall in Bitcoin’s price can make mining unprofitable for even more participants, causing them to sell, and so on. 

This is hardly an unintended element of the BTC blockchain, as each spike in miner capitulation typically follows a halving event. The idea is that Bitcoin has to shed some of its mining competition to the point that it becomes profitable again. Once it does, the market rekindles to the point where we’ve consistently seen post-halving all-time highs in Bitcoin’s price.

Source: BiTBO

Related: JP Morgan Suggests March 2024 as Possible Peak of Current Bull Market


Sideways Movement to Continue – But Long-term Outlook Remains Bullish

According to crypto analyst Ki Young Ju, the market still has a while to go before we hit the “difficulty bottom”, where profitability resets and miners re-enter the market. 

As Young Ju states, capitulation typically stops when daily mining value is at 40% of the yearly average – for now, miners are still seeing close to three-quarters of the annual profit. According to this metric, the industry likely needs to endure a bit more mining carnage before re-entering a bull run.

However, it’s worth noting that past market cycles are vastly different from Bitcoin’s present one. Institutional involvement and a shifting regulatory landscape has forever changed the game, and what was true in pre-ETF cycles may not apply to post-ETF markets. 

Nevertheless, Ki Young Ju’s advice for navigating the current difficulties remains pertinent – stay risk-averse but maintain a long-term bullish outlook.    

Ben Knight

Ben Knight

Ben Knight is a writer and editor from Melbourne with a passion for all things music and finance. He enjoys turning complex topics – especially the technical details of cryptocurrency – into digestible bites that anybody can understand. He acquired his Master’s in Writing, Editing and Publishing from RMIT in 2019 and has run his own creative writing business ever since.

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