Miner Capitulation Signals Potential Bitcoin Rebound VanEck Says:

Periods where bitcoin mining slows may actually represent less bearish market conditions and may signal a continuation in market pricing momentum, according to digital asset investment firm VanEck.

Recent information available reveals that the hashrate of bitcoin's network declined by the greatest amount within the last 30 days since April of 2024. Although hashrate is perceived to be linked to times of stress within the bitcoin community, VanEck believes that hashrate represents an indicator that fluctuates close to bottoms and not peaks.

While bitcoin markets are trading around $87,000 after a major pullback from their peak in October, miners are under pressure because of low prices and the effect of the latest halving. It is generally seen that such conditions pressure miners who are incurring higher costs and are over-leveraged to either shut down their operations or liquidate their holdings, a phase known as "miner capitulation".

VanEck points out that hashrate degradation takes time to fall after the market, so the greatest amount of selling pressure may already be out of the market by the time the hashrate decreases. When the less efficient miners leave the market, the mining difficulty adjusts, making it more profitable for those that stay, hence less selling pressure.

Historically, such a structure has been more advantageous to longer-term buyers. VanEck determined that when negative growth in hashrate at the 90 day mark occurred, bitcoin returned positively within the next 180 days approximately 77 percent of the time. It is estimated that buying during hashrate corrections resulted in improvements of approximately 2,400 basis points in six-month forward returns relative to buying during increasing hashrates.

As per VanEck, the current downturn in mining seems selective rather than systemic, implying that the overall network is strong and that the capitulation of miners could set the stage for yet another phase of recovery for the price of bitcoin.

#VanEck