No Miner Capitulation: Bitcoin Miners Operating at More than 55% Profit

On March 12th, bitcoin experienced one of its largest crashes ever, but now, over three months later, the market has turned around.

Before the crash, on February 14th, Bitcoin’s market cap reached $188.76 billion, the highest point in 2020. After the crash, the market cap recovered to $187.58 billion by June 1st.

Interestingly, bitcoin outperformed traditional classes in both absolute and risk-adjusted metrics during the COVID-19 shutdown in the US. While nearly all asset classes declined initially in early March in a flight to cash, bitcoin outpaced others in the rally in April and May.

But now, as we move closer to the end of June, the price is back to ranging, and trading volume is at low levels.

Volume on bitcoin’s blockchain is just as stable as the price with the average amount sent through the blockchain over the last week at about $1.3 billion.

A positive trend, however, was seen in the active addresses. The current level of active bitcoin addresses has been seen only twice before in the digital asset’s history. Once in December 2017, when BTC price approached $20k and then in July 2019 when the price climbed from $5k to nearly $14k.

Source: CoinMetrics BTC Active Addresses

No ‘mining death spiral'

This week, the most notable development was a positive difficulty adjustment. After spending 12 days with an average block time of 8 minutes 42 seconds, bitcoin’s mining difficulty increased by 14.9%. This was the tenth-largest difficulty adjustment the network experienced since January 15 and the biggest positive one since January 2018.

This was also the first difficulty increase since the bitcoin halving in May.

“The bitcoin network mining difficulty and hash rate have rebounded to near all-time highs with no ‘mining death spiral' thesis playing out,” noted TradeBlock.

Source: TradeBlock

Despite this largest surge in bitcoin mining difficulty in 29 months, it isn’t likely that the hash rate or price would be affected, with no risk of miner capitulation.

Bitcoin price is actually trading well above the Profitability Baseline for New-Gen machines, said F2Pool, one of the largest bitcoin mining pools. And the longer the machines will mine profitably, the more the operation will earn above their initial ROI.

As per F2Pool’s data, miners are able to mine bitcoin profitably at below $6,000 which in part is due to the rainy season in China which has reduced the cost of electricity and also because of the latest energy-efficient mining machines.

Source: F2Pool

“Neither Black Thursday nor the Halving threatened to put these machines underwater,” said F2Pool.

Meanwhile, bitcoin generation versus spend slipped since early June is now normalized, meaning miners continue to sell more coins than they are producing.