Bitcoin Hashrate Decline and Miner Capitulation

Bitcoin's hashrate has recently plummeted from its 18-month upward trend, indicating a potential Bitcoin miner capitulation. The true hashrate of Bitcoin, which measures the mining difficulty, dropped to approximately 600 exahashes per second (EH/s) following the sustained uptrend.

The deviation from the extended positive trend may imply that some Bitcoin mining companies are offloading their BTC holdings. According to Ki Young Ju, the founder and CEO of CryptoQuant, the declining trend in Bitcoin's hashrate points to miner capitulation. Young Ju shared his analysis on June 13, stating, 'Bitcoin hash rate's 18-month upward trend has broken, suggesting some miners are capitulating.'

Bitcoin network true hashrate. Source: Ki Young Ju

Despite the decrease in Bitcoin's hashrate, mining firms have not been significantly liquidating their Bitcoin assets. The flow of Bitcoin from miners to cryptocurrency exchanges saw a decline from 15,470 BTC in May to 7,239 BTC in June, as reported by CryptoQuant.

Bitcoin: Miner to exchange flow (total). Source: CryptoQuant

The drop in Bitcoin's price from over $71,100 to $66,800 is not entirely influenced by miner capitulation. Daily miner flows to exchanges diminished steadily during this period, suggesting other factors at play.

The decline in Bitcoin's actual hashrate could also be linked to mining companies decommissioning older ASIC chip mining rigs that have become unprofitable post the fourth Bitcoin halving. The total hashrate of Bitcoin fell to 586,377 TH/s on June 12, based on data from Blockchain.com.

Bitcoin total hashrate. Source: Blockchain.com

A report by CoinShares from April 19 foresaw this temporary decline and predicted a surge in hashrate by 2025. The report mentioned that post-halving, the hashrate might drop slightly as miners shut down unprofitable ASICs.

While the cost of electricity remains a key factor in the profitability of mining operations, older ASIC models like S19 XP and M50S++ are operating at a loss with electricity costs exceeding certain thresholds. As indicated by Hashrate Index, these models face profitability challenges at specific electricity cost levels.