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bitcoin miner capitulation

Three’s a Crowd: Final Bitcoin Miner Shakeout Points to an Epic Rally

Tony Spilotro by Tony Spilotro
3 years ago
in Bitcoin, Cryptocurrency news
Reading Time: 3 mins read
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Bitcoin just completed a repeating pattern signaling the third, and potentially final miner capitulation event, that in during past cycles proceeded the start of a major bull run, leading to a new all-time high.

Past Bitcoin Market Cycles Suggest Miners Capitulate Three Times Before Bull Run

All financial markets are cyclical, and Bitcoin and cryptocurrencies are no different. These assets go through periods of extended downtrends, where the market is filled with negative sentiment and falling prices, followed by uptrends when prices are rising and investors are irrationally exuberant.

However, one area where Bitcoin differs from other assets in the financial world like stocks, real estate, and more, is that the asset’s underlying network is powered by a process called proof-of-work.

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Related Reading | Bitcoin Trades Below Production Cost, Miners Are Better Off Buying 

Bitcoin mining involves the use of complex computers specifically designed for processing power, to solve mathematical equations that unlock a reward of Bitcoin.

Miners are regularly selling off their mined Bitcoin to fund operations, and the rate at which they sell the asset depends on the cost of production in relation to the current price.

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For example, recently, the during last month’s catastrophic market collapse, the price of Bitcoin fell so far below-cost or production, miners would literally be better of buying BTC from spot exchanges at the current rate than continue to operate expensive machinery at a loss.

Clearly, miners wouldn’t be selling their BTC reserves at a loss after investing heavily upfront on equipment, energy, and more. Less supply from miners entering the market throws off supply and demand balance, causing prices to rise.

Other times, the situation gets so bad for smaller time miners, they simply turn off their machines for good and close up shop, essentially capitulating in the process.

Further adding intricacy to how this impacts supply and demand, is each of Bitcoin’s pre-programmed halvings. Every four years or so, the reward miners receive is slashed in half.

In past cycles, Bitcoin price fluctuations have caused miners to capitulation three times per cycle, before the bull run officially begins and a new all-time high is reached.

bitcoin hash ribbons

According to the hash ribbons, miners have now capitulated for a third and potentially final time before it is off to the races for Bitcoin bulls once again.

The only minor – and miner – difference this time around, is that the third capitulation has occurred ahead of the halving.

Related Reading | Prelude to Bull Run: Bitcoin Hash Ribbons Signal Miner Capitulation Only Just Started 

In past cycles, the third and final miner capitulation occurred post-halving, due to the sudden and sharp increase in the cost of production.

While yet another capitulation event cannot be ruled out, but if three’s a crowd, this third and final event could have been the shakeout necessary before Bitcoin price can go yet another epic rally toward a new all-time high.

Tags: bitcoinbtcusdcryptohash ribbonsmining
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Tony Spilotro

Tony Spilotro

I'm Tony Spilotro. Behind the pseudonym, I'm a global remote work leader with a decade of award-winning content experience and excellence. Here, I explore my newfound passions pertaining to privacy, finance, economics, politics, cryptography, property rights, and other libertarian-esque views. I am a Bitcoin evangelist, maximalist, and educator whenever I can be, helping to spread its message of freedom from government control, monetary policy mismanagement, and passing the buck - literally – to future generations. My journey from a curious retail crypto investor to a serious Bitcoin advocate, trader, and technical analyst is an unusual one, but life-changing nonetheless and has become less about money and more about a long-overdue revolution. While a firm believer in the laws governing math and science, I am profoundly fascinated by the impact of astrology and astronomy including moon and solar cycles and planetary alignment and their ability to influence and potentially predict markets. It hasn't yet clicked for me as to how to put anything to use, but I consider it my current rabbit hole I can't yet dig out of. My perspective of growing up alongside the internet, the dot com era, the Great Recession, and roots in video games collecting coins and rare items caused Bitcoin to immediately make sense to me. Through all of these lenses, I seek to produce content that is educational and entertaining, and I thank you sincerely for taking the time to read what I have to say. Please follow me on Twitter at @tonyspilotroBTC and feel free to drop me a line if you would like to work together.

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