If you have perused Bitcoin and Crypto Twitter at all over the past few weeks, you’ve likely seen the term “miner capitulation” mentioned again and again.
You see, over the past few months, the price of BTC has fallen off a proverbial cliff, tanking from $14,000 to $7,000 in a matter of months. As this has taken place, Bitcoin’s hash rate, the amount of computational power being dedicated to processing blocks, has started to slow, leading some to fear that a “miner capitulation” has taken place, whereas non-industrial mining operations “get backed into a corner.”
This theoretically should force miners to sell the BTC they earned via mining, often all at once, to keep the lights on, cash out, or to upgrade their systems for the future. This may sound relatively innocuous — of course, miners need to sell Bitcoin to fund their operational expenses — but this can be a vicious cycle.
Some have feared, then, that Bitcoin is on the verge of collapsing entirely because of the seeming miner capitulation.
Though, according to the latest blockchain data, this is far from the case.
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Bitcoin Miners Remain Bullish
According to prominent Bitcoin quantitative analyst PlanB, no miner capitulation has taken place, with his node registering an estimated hash rate of around 113 EH/s — still hundreds of percent higher than it was a year ago, or dozen of percent higher than it was just a few months ago.
— PlanB [Jan/3➞ ] (@100trillionUSD) December 14, 2019
PlanB wrote in a reply to the above tweet that the strong hash rate trend implies that “miners are optimistic” about Bitcoin’s price prospects, from a more medium and long-term perspective, and are thus “investing in mining hardware like madmen” to capitalize on the opportunity before it passes.
There are signs that a growing hash rate in a Bitcoin bear market is a decidedly positive price signal from a long-term perspective. FractalWatch, a Twitter account dedicated to tracking cryptocurrencies, recently remarked that in previous bear markets, Bitcoin’s hash rate exploded higher on a logarithmic scale despite a strong decline in price. Then, eventually, this divergence broke, leading to a rally of thousands of percent.
Right now, a similar divergence is forming, with Bitcoin miners continuing to expand their operations at a rapid pace as the price of BTC has faltered, creating a large-scale bullish divergence, potentially implying that a macro bull phase is still in its earliest formations.
Bitcoin miners are more confident than price makers. pic.twitter.com/FBCFHxThYw
— Fractalwatch (@Fractalwatch) December 14, 2019
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