It might be as soon as August that miners begin returning, and difficulty is already planning an uptick.
Bitcoin (BTC) miners appear to have been capitulating for nearly two months, but an end to the squeeze may already be here. That was the conclusion from Blockware, a Blockchain infrastructure, and crypto mining company, as it published its latest Intelligence Newsletter on July 29.
“Expect” Capitulation To End By September
The most recent edition of the market research series highlighted some changes in the mining ecosystem apt to scale up a trend in place since early June.
Miners, based on the hash ribbons metric, have been retiring for an “extended period of time,” Blockware says, and on August 1, hash ribbons have been signaling capitulation for 55 days. The company wrote:
“The current miner capitulation began June 7th, 2022, and it has lasted a significant amount of time. It’s important to note that miner capitulations are particularly relevant because it reveals that a large number of machines are no longer hashing.
Since June 7th, other new generation mining rigs have likely been plugged in by both public and private mining companies. However, enough old generation machines or inefficient overleveraged miners have shut off, that hash rate and difficulty have actually decreased in size.”
The upheaval shows the profitability hurdles engendered by the BTC price downturn, which reached $17,600 in June – pushing the market back to late 2021.
As signs, although contested, emerge that price strength is returning, so the chances of better conditions for miners are improving. Based on Blockware, capitulation, as described by hash ribbons, needs to be over before the summer.
The Newsletter added:
“If there are no new lows in Bitcoin, we should expect the miner capitulation to end in August or September at the latest.”
Difficulty To Break Multi-Month Downtrend
When it comes to the miners’ return to form, early signals are already becoming visible on-chain, thanks to the now automated adjustments in Bitcoin’s network fundamentals.
Mainly, mining difficulty is due for its first increase in two months on August 4 after three consecutive downward adjustments. Blockware summarized:
“Currently it’s projected to be positive, and there is a high probability that it persists.”
The increase, in case the current spot price levels persist, will be a modest one at about 0.5%. For comparison, the previous drop in difficulty reached -5%.