Is Bitcoin Crashing Because Of Miner Capitulation And Speculative BTC Bets?
June 11 2024 - 12:30PM
NEWSBTC
Bitcoin is dumping when writing, cooling off from May highs of
nearly $72,000. Down roughly 10% from all-time highs, there could
be more losses on the way, at least looking at the candlestick
arrangement in the daily chart. Now, Willy Woo, a Bitcoin on-chain
analyst, thinks the drop is primarily because of the ongoing “miner
capitulation.” Woo notes that the network is now actively “culling”
out weak miners, forcing them to shut down their operations.
Related Reading: Blood In The Water? Ethereum Whales Circle As
Price Drops As they exit, they sell their BTC holdings, running
into thousands, if not tens of thousands, of the coin. Bitcoin
Network “Culling” Weak Miners Because of market dynamics, the
higher the supply, the lower the prices; Bitcoin is flushing lower,
squeezing out even more miners. It remains to be seen for how long
this will continue, but the impact of Halving is now increasingly
evident. In Woo’s assessment, miner capitulation is necessary.
Moreover, weak miners’ forced liquidation of BTC will only make the
network more resilient. This is because the “cull” will eliminate
less efficient players from the network, ultimately leading to a
more robust system. On April 20, the Bitcoin network Halved miner
rewards from 6.25 BTC to 3.125 BTC. Since miners depend on rewards
as their primary income source, their revenue was slashed by 50%.
If they choose to continue operating, they must not only compete
with larger mining firms, most of which are public, like Riot
Blockchain and Mara Digital, but they must also be very efficient,
using modern gear for a higher hash rate. Staying efficient is a
primary challenge, and rather than competing with public miners,
some, as it appears, are folding and choosing to exit the business.
Interestingly, even as “weak” miners shut down operations, the
network hash rate–a measure of the total computing power–is still
at near record highs. According to YCharts, the hash rate is 578
EH/s, down from 721 EH/s registered on April 23. Will BTC Prices
Recover If Speculative Bets Are Purged? Woo also thinks there is a
need to “purge the degen open interest in futures bets.” The
analyst says excessive leverage trading on perpetual platforms like
Binance, OKX, and Bybit must drop. The spike in degen trading has
driven up the “paper Bitcoin,” or speculative bets. Woo explains
that following the collapse of FTX in November 2022, speculative
bets were wiped, allowing for a swift recovery in BTC prices in the
following months. Related Reading: $2 Billion Crypto Funds Flow
Into Market On Rate Cut Buzz If the coin is to recover and reject
the current attempts for lower lows, the clearance of the current
“paper Bitcoin” overhang will be required for a sustained leg up.
Whether the “cleansing” of weak miners and speculative bets will
help drive up prices remains to be seen for now. Bitcoin is
trickling lower, confirming the losses of June 6. The immediate
support lies at $66,000. If this level is lost, BTC could flash
crash to $60,000 or even May 2024 lows of $56,500. Feature image
from DALLE, chart from TradingView
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