Red Alert For Bitcoin: Network Hashrate Takes A 20% Dive

Christian Encila

Last Updated: June 12, 2024 9:27 am

3 mins read

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The post-halving world of Bitcoin continues to throw curveballs. After a hashrate surge to celebrate the block reward reduction in April, Bitcoin’s computational power has taken a nosedive, dropping 20% in recent weeks.

This unexpected decline has ignited a debate among analysts, with some sniffing out a fire sale and others urging caution.

Bitcoin: Hashrate Hiccup Or Miner Exodus?

Hashrate, a measure of the combined processing power dedicated to securing the Bitcoin network, typically climbs after a halving event as miners invest in more powerful rigs to compete for the reduced rewards.

However, this time around, the trend defied expectations. Experts like Maartunn, a pseudonymous analyst at CryptoQuant, believe this signals a potential “miner capitulation.”

Less efficient miners are now likely throwing in the towel. The halving, which cut block rewards in half, squeezed profit margins for miners using older equipment. As these miners shut down their operations, the hashrate dips.

Bitcoin is now trading at $66.306. Chart: TradingView

Hash Ribbons Flash Warning Sign

Supporting Maartunn’s theory is a technical indicator called Hash Ribbons. This metric tracks the difference between short-term and long-term hashrate averages. When the gap widens, it suggests a decline in mining activity, potentially due to less efficient miners dropping off.

The recent hashrate plunge has triggered a spike in Hash Ribbons, historically a sign of miner capitulation that has often coincided with price lows for Bitcoin.

Bitcoin Miners Selling Off?

Further fueling the capitulation theory is a decrease in Bitcoin’s Miner Reserve. This metric tracks the amount of Bitcoin held in wallets associated with miners. A decline in the reserve suggests miners might be offloading their mined coins, potentially to cover operational costs or to exit the market altogether.

Undervaluation Signal Or Cyclical Dip?

Maartunn interprets these signs as a bullish indicator. Hash Ribbons often point to opportune moments to buy, he argues. Backing his claim is the Market Value to Realized Value (MVRV) ratio, which suggests Bitcoin might be undervalued.

BTC 24-hour price action. Source: Coingecko

This metric compares the current market price to the average price at which all Bitcoins were acquired. A negative MVRV, like the one Bitcoin currently has, suggests the asset is trading below its historical cost basis, potentially indicating a buying opportunity.

Not Everyone On The Capitulation Train

However, not all analysts are convinced. Some argue that the hashrate decline could be temporary, perhaps due to factors like extreme weather events disrupting mining operations in certain regions.

Additionally, the post-halving period is typically one of adjustment for miners, and a short-term hashrate fluctuation might not necessarily signal a mass exodus.

The post-halving Bitcoin landscape is still unfolding. While the hashrate decline and other signs suggest a potential buying opportunity, particularly for long-term investors, the situation remains fluid.

Featured image from Shutterstock, chart from TradingView

Christian Encila

They say journalists never truly clock out. But for Christian, that's not just a metaphor, it's a lifestyle. By day, he navigates the ever-shifting tides of the cryptocurrency market, wielding words like a seasoned editor and crafting articles that decipher the jargon for the masses. When the PC goes on hibernate mode, however, his pursuits take a more mechanical (and sometimes philosophical) turn.

Christian's journey with the written word began long before the age of Bitcoin. In the hallowed halls of academia, he honed his craft as a feature writer for his college paper. This early love for storytelling paved the way for a successful stint as an editor at a data engineering firm, where his first-month essay win funded a months-long supply of doggie and kitty treats – a testament to his dedication to his furry companions (more on that later).

Christian then roamed the world of journalism, working at newspapers in Canada and even South Korea. He finally settled down at a local news giant in his hometown in the Philippines for a decade, becoming a total news junkie. But then, something new caught his eye: cryptocurrency. It was like a treasure hunt mixed with storytelling - right up his alley!

So, he landed a killer gig at NewsBTC, where he's one of the go-to guys for all things crypto. He breaks down this confusing stuff into bite-sized pieces, making it easy for anyone to understand (he salutes his management team for teaching him this skill).

Think Christian's all work and no play? Not a chance! When he's not at his computer, you'll find him indulging his passion for motorbikes. A true gearhead, Christian loves tinkering with his bike and savoring the joy of the open road on his 320-cc Yamaha R3. Once a speed demon who hit 120mph (a feat he vowed never to repeat), he now prefers leisurely rides along the coast, enjoying the wind in his thinning hair.

Speaking of chill, Christian's got a crew of furry friends waiting for him at home. Two cats and a dog. He swears cats are way smarter than dogs (sorry, Grizzly), but he adores them all anyway. Apparently, watching his pets just chillin’ helps him analyze and write meticulously formatted articles even better.

Here's the thing about this guy: He works a lot, but he keeps himself fueled by enough coffee to make it through the day - and some seriously delicious (Filipino) food. He says a delectable meal is the secret ingredient to a killer article. And after a long day of crypto crusading, he unwinds with some rum (mixed with milk) while watching slapstick movies.

Looking ahead, Christian sees a bright future with NewsBTC. He says he sees himself privileged to be part of an awesome organization, sharing his expertise and passion with a community he values, and fellow editors - and bosses - he deeply respects.

So, the next time you tread into the world of cryptocurrency, remember the man behind the words – the crypto crusader, the grease monkey, and the feline philosopher, all rolled into one.

Disclaimer: The information found on NewsBTC is for educational purposes only. It does not represent the opinions of NewsBTC on whether to buy, sell or hold any investments and naturally investing carries risks. You are advised to conduct your own research before making any investment decisions. Use information provided on this website entirely at your own risk.