Before the recent market debacle in crypto, most calculations estimated the expenses forminingat around $8,000.
For example, a chart shared by well-known trader Byzantine General illustrated that according to March 8th data, the production cost of BTC and the average cash flow for miners hovered around $7,700.
https://twitter.com/ByzGeneral/status/1236618619951419395
Tragically, BTC shattered through this threshold during last week's market crash, diving to a staggering low of $3,800.
This development led many to believe that miners with minimal profit margins might soon face bankruptcy, power down their devices, and potentially trigger a collapse in Bitcoin's network as they surrender.
While there's no concrete evidence of an impending collapse, signs indicate that the recent Bitcoin downturn is already impacting miners negatively.
Bitcoin Hash Rate Sharply Drops
Recent insights from Blockchain.com reveal that the Bitcoin network's processing power—essentially the total computational strength used to maintain the network's integrity—plummeted by about 40% since its late February high.
To be precise, the hash rate fell from 136 terahashes per second to just 82 terahashes.
A further decline in mining activity was confirmed by a tweet from Bitcoin data expert Digitalik, who observed a reduction to a mere 40 blocks mined over 12 hours—almost halving the usual count.
In a span of the last 12 hours, only about 40 blocks got mined—equivalent to one block every 18 minutes. #bitcoin #btc https://t.co/GC1oNMCNq1
— Buy Bitcoin Worldwide (@BuyBTCWW) March 20, 2020
This indicates that, when the network's difficulty adjustment occurs in roughly 10 days, it is likely to decrease to ensure block creation returns to a 10-minute interval.
Miner Capitulations Mark Bottoms
Although fears about a mining ecosystem collapse seem warranted, these concerns could actually signal Bitcoin's value approaching a bottom before possibly rallying upwards.
Crypto investor Light suggested that the narrative surrounding 'miner capitulation' has convinced him to one course of action: 'stay long on BTC.'
If I have to distill years of crypto trading into one crucial insight, here's what it would be:
When chatter about miner capitulation gets louder, be certain to maintain your long BTC position.
— light (@lightcrypto) March 17, 2020
Renowned Bitcoin trader DonAlt, who foresaw much of the recent decline, shared Light’s outlook perfectly. writing :
Now that the storyline has shifted fromhalvingis going to bebullishto a focus on miner capitulation, it's worthwhile to consider long positions once more.
Intriguingly, the partly humorous comments from Light and DonAlt hold some truth; extensive discussions of 'miner capitulation' and 'mining death spirals' were signals seen at the bottom of Bitcoin price dips in 2018 and 2019, hinting this scenario might play out again.
In early December 2018, Atulya Sarin, a professor at Santa Clara University, published a controversial piece on MarketWatch suggesting Bitcoin was nearing insignificance, referring to a 'death spiral.' Just a week later, BTC hit its bottom at $3,150. released Late last November, when Bitcoin had plummeted 50% from a high of $14,000 in 2019, talks of miner capitulation and the death spiral narrative returned. Eventually, within weeks, BTC rebounded from $6,400, signaling the start of a new upward trend.miningThis historical consistency of this so-called 'indicator' implies Bitcoin isn't necessarily at its ultimate price floor, but it's likely quite close to it.
As a writer deeply engaged with the cryptocurrency arena since 2013, I have had my personal insights and interviews published in top tier outlets such as LongHash, NewsBTC, and Decrypt. Apart from writing, I am part of the EXODUS team at HTC, a technology company based in Taiwan, and I own a modest amount of Bitcoin. To reach out, contact [email protected].
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