Bitcoin [BTC] dropped more than $200 on Monday as the price dipped below $7000. The bearish break-out comes after a long period of uncertainty in the sentiments. BTC closed at a record 7 month low on the daily scale.
The price of Bitcoin at 3: 00 hours UTC on 17th December 2019 is $6880. It is trading 2.8% lower on a daily scale.
The impending Bitcoin halving has historically been a fundamental bullish signal for the cryptocurrency. However, Charles Edwards, a crypto analyst at Cipirole Digital Assets Management warns in a tweet,
Day 27 of the Bitcoin Miner Capitulation.
Don’t long falling Hash Rates.
It seems like while the halving is not reflecting as expected in terms of price, the miners are prepared to discount their investments. The hash rate decrease which began sometime during November finally saw a reversal in the increasing rate of hash rates this year. Bitcoin mining reached an All-Time High in mining power as it breached the 100,000,000 Th/s mark.
Weak Miners Exiting the Market
Nevertheless, a lot has changed in a year. The launch of new cost-effective and powerfull miners has decreased the break-even cost of Bitcoin from mining (around $5600-$6500 during June). As reported on Coingape yesterday, currently, this cost might be close to $4000/BTC.
Moreover, due to the increase in the mining difficulty, the share of rewards for old miners has decreased further. Hence, the capitulation seems to be hurting the predecessor models largely, as weak miners prepare for an exit.
During the same time as now last year in 2018, Bitcoin witnessed the longest and largest capitulation due to the loss-making price at the moment. As Bitcoin’s price fell below the break-even cost for mining, the miners choose to switch their machines off.
According to Edwards we are currently are the average number of days (27) in Bitcoin’s history as far capitulation is concerned.
Note: we are currently at the average duration (excluding 2011).
Shouldn’t be too long to go now…
The capitulation indicator can also be used as a buy signal. The beginning of increase or accumulation in hash rates has often been followed by an increase in price as well.
Nevertheless, the signal is red for now and things could get worse in expectation of May 2020 the mining rewards will reduce by half.
Do you think that new investment in mining equipment would move the industry forward or miner capitulation could get worse? Please share your views with us.
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Nivesh from Engineering Background is a full-time Crypto Analyst at Coingape. He is an atheist who believes in love and cultural diversity. He believes that Cryptocurrency is a necessity to deter corruption. He holds small amounts of cryptocurrencies. Faith and fear are two sides of the same coin. Follow him on Twitter at @nivishoes or mail him at nivesh(at)coingape.com