Bitcoin really hasn’t done too well over the past few days; since the $9,200 peak seen on Saturday, the price of the cryptocurrency crashed as low as $3,800, marking a more-than-50% crash from the weekly high.
Unfortunately, a key signal suggests that the prospects of recovery may be diminishing.
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Key Bitcoin Signal Seems Poised to Flash
While many stories in the media paint Bitcoin mining as a key to easy riches, this isn’t always the case; over the past few months, it has been estimated that the cost of mining a single BTC came in around $8,000, assuming standard electricity prices and the newest publicly-available hardware.
This means that with the weakness, higher-cost miners have been forced out of the market, marked by the 30% drop (per data from Blockchain.com) from the all-time high hash rate established just last week.
This means that the Hash Ribbons, an indicator tracking the moving averages of the hash rate, is on the verge of printing a signal of “miner capitulation,” when miners are forced out of the market en-masse due to BTC trading below the cost of mining.
Hash Ribbons coming in hot for another Miner Capitulation.
Currently a 1 week data delay so crossover may have already occured…#Bitcoin pic.twitter.com/uPektFzeJX
— Charles Edwards (@caprioleio) March 14, 2020
To better illustrate the importance of miners capitulating, here’s a chart from industry podcaster and Bitcoin bull Preston Pysh. As Pysh’s chart below clearly depicts, the mining capitulation what preceded the now-infamous 50% crash from $6,000 to a price just above $3,000 in late-2018.
Furthermore, the last miner capitulation that was seen late last year was followed by a 20% drop lower, before an eventual recovery that saw Bitcoin rally 50% to $10,500 in just a few months’ time.
Potential miner capitulation at a hash rate cross.
Great chart by @caprioleio. #Bitcoin pic.twitter.com/fBMwrrzHxf
— Preston Pysh (@PrestonPysh) November 14, 2019
History rhyming will see Bitcoin continue to trend lower once (if) the miner capitulation is confirmed over the next few days and weeks. Though, history rhyming will also see the price of the cryptocurrency explode dozens of percent, maybe hundreds of percent higher once miners begin to siphon resources to securing the network once again.
Do Bulls Have Any Hope?
Fortunately, analysts currently see a bull case forming for Bitcoin that may mitigate some of the downside risks.
Filb Filb, for instance, pointed to three reasons why Bitcoin could squeeze higher: the short-term chart has formed a textbook Adam and Eve bottom, the funding rate in BitMEX is favoring a bullish reversal, and the bid side of the order book has started to stack up again in an act that indicates buying support.
Related Reading: Why Did Bitcoin’s Price Plunge 50% to $3,800 In 24 Hours?
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