- Bitcoin hashrate declined significantly over the last few days, which may result in miner capitulation.
- Activity on the Bitcoin network also fell significantly.
- A key indicator of the Bitcoin [BTC] network’s processing power, the hashrate drawdown, has plunged to its lowest point since December 2022.
Bitcoin hashrate drops to lowest level since December 2022, sparking concerns.
Bitcoin hashrate declines
According to data from Blockchain.com, Bitcoin’s hashrate has experienced a steep decline this month, with levels dipping to those seen during the FTX exchange crisis in late 2022.
This decline is notably post-Bitcoin’s recent halving, which reduced miner rewards to 3.125 BTC per block, distinguishing it from the circumstances last year.
This drop in hashrate suggested that some miners may be struggling to stay afloat. Bitcoin miner capitulation occurs when miners are forced to shut down their operations due to unsustainable costs.
This typically happens when the cost of mining Bitcoin, which includes electricity, hardware, and maintenance expenses, surpasses the revenue generated from mining rewards.
The recent halving has undoubtedly exacerbated this challenge for miners, as they’re now earning less Bitcoin for the same amount of work.
The current hashrate decline could be a sign that some miners are capitulating, leaving the network.
If expenses continue to rise, and miners are forced to sell their holdings, downward pressure on BTC could be created which may cause a significant correction.
Bitcoin ecosystem in trouble
Bitcoin miners are facing immense pressure as their margins are squeezed from multiple angles. Following a brief period of high transaction fees during the Bitcoin-based Rune protocol spike, miners are now contending with significantly decreased earnings as network activity stalls.
Miners are also grappling with reduced revenues from alternative sources as network activity diminishes.
Recent data indicates daily Rune transactions have plummeted by approximately 90%, drastically affecting total miners’ earnings from these transactions.
Along with that, the overall NFT transactions occurring on the network also declined significantly in the last few days. CryptoSlam’s data indicated that the sales volume for these NFTs had fallen to 68.32% in the last month.
With transaction volumes slumping, miners are finding it increasingly difficult to cover operational costs, which could lead to further capitulation if market conditions do not improve.
Moreover, the activity on the network had also declined.
COINOTAG’s analysis of Santiment’s data indicated that the daily active addresses on the network had declined materially over the last 30 days, decreasing from 955,000 a day, to 666,000 a day.
This decline in activity can further impact the ability of miners to generate significant amounts of revenue.
Conclusion
The recent decline in Bitcoin’s hashrate and network activity underscores the financial strain on miners following Bitcoin’s halving. As operational costs rise and earnings fall, the risk of miner capitulation looms large. Monitoring these metrics will be crucial for predicting potential market movements and understanding the broader implications for the Bitcoin network moving forward.
