Here’s Why Bitcoin Miner Capitulation Is Not Here Yet: 2020 BTC Halving is Under 180 Days Away
- Hash ribbons on the brink of inversion, A rare occurrence but a great buy opportunity
- No capitulation yet – Hash rate still healthy, demand for mining hardware strong, miners still several thousand dollars above market average cash flow breakeven
If you have been on Twitter lately, the Crypto Community is all about “Miner Capitulation.” While some belief this to not be good for Bitcoin others see it as a bullish occurrence for the leading cryptocurrency.
Miner Capitulation for starters, as analyst Cole Garner, explained in a Twitter thread is the small miners being backed into a corner when the price of Bitcoin is low and the mining hardware for generating BTC becomes obsolete.
MINERS ARE CAPITULATING
1/ Hash ribbons is on the brink of inversion. That’s news you never want to hear.
— Cole Garner (@ColeGarnerBTC) November 19, 2019
For small miners, when they can no longer compete with large players, they can’t pay for electricity and overhead costs that put their return on investment into negative and leads them to sell their BTC to keep the operation running.
Inversion: A Rare Occurrence but a Great Buy Opportunity
Miner capitulation can be anticipated with hash ribbons and they are on the brink of inversion whose likely outcome is cash desperate miners selling their bitcoin, first gradually and then aggressively. This Garner says is “vicious cycle” as once undercapitalized miners start panic selling, it follows with the price dumping, longs getting squeezed, and stop-loss cascading.
However, an inversion hasn’t happened yet, though the hash rate of Bitcoin network is currently down 14% from it's all-time high set on October 23, it is expected to recover before “capitulation starts to snowball.”
A hash ribbon inversion confirms that the trend is down but this has happened only twice in the last four years. The first time it occurred in 2016, a few weeks after the halvening that triggered an immediate 30% drop in price. The second time was in 2018 when price broke $6k and the market hit bottom.
Inversion of hash ribbon in 2016
But Garner warns,
“It’s not looking good though — we’ve *never* been so close to inversion for so long without going over the edge.”
An inversion, however, will offer a great buying opportunity as that might be the last time for prices to be that low. It also means, consolidation, and a full-blown bull market.
Yes this is very possible – a "mini" capitulation.
We saw something similar in 2012 and 2016.
2012 is probably the most relevant to today, because it was ~6 months prior to the halving. pic.twitter.com/4OnMO1IVRs
— Charles Edwards (@caprioleio) November 19, 2019
There’s Still Time, No Miner Capitulation Yet
Economist and analyst Alex Kruger says miner capitulation will happen eventually, but the market is currently a long way from that. He points out how in 2018, the hash rate dropped 32% in a month and during the bottom from October to December, this drop was 35% which we have yet to see.
That is ahead of us. At present there has been increased miner selling, yet this selling activity does not represent capitulation of any kind, as most miners are profitable given current prices and difficulty, particularly so on a cash basis (i.e. ignoring capex depreciation).
— Alex Krüger (@krugermacro) November 21, 2019
According to Dovey Wan of Primitive Crypto, the demand for mining hardware with “the recent orders of T17, S17 and the long queue waiting to get M20s” suggests that miners have not capitulated.
Saying that all miners have capitulated is kinda like saying "everyone on my feed is bullish so price has to drop" when you follow 139 of your friends who collectively own about $10,142.51 of Bitcoin.
— Luke Martin (@VentureCoinist) November 20, 2019
Christopher Bendiksen, Head of Research at Coin Shares, a digital asset management firm shares similar sentiments as Kruger and Wan as he says retiring obsolete gear is not capitulation. He said,
“I find it strange that people are talking about miner capitulation here. From our numbers we are several thousand dollars above market average cashflow breakeven, even at ¢7/kWh (relatively expensive number).”
Miner capitulation is the sign of the end of a downtrend. But as analyst, Willy Woo said “way more” volatility is expected in the market which is bearish in the short term, it means capitulation is yet to come.