Key Points
- The Hash Ribbon metric indicates an end to the Bitcoin miner crisis.
- Decreased supply pressure from miners could potentially allow Bitcoin prices to rally.
After the halving event in April that reduced the revenue of Bitcoin (BTC) miners by half, the mining sector faced a crisis in profitability. However, after more than three months, the health of the sector has shown signs of recovery according to the Hash Ribbon metric.
CryptoQuant, a crypto analytic platform, has indicated that the miner capitulation has ended according to this metric.
Understanding the Hash Ribbon Metric
The Hash Ribbon metric is used to track miner stress or crisis and is generally associated with a significant drop in hash rate, which is the computational power required to mine BTC.
The Bitcoin miner crisis tends to push less efficient and smaller scale players out of the market. However, major players like MARA continually adopt new machines and optimization techniques to remain viable.
Implications for Bitcoin
It has been observed that miners have adopted more efficient equipment as the BTC hashrate has recovered and hit a record high of 638 EH (exa hashes). Miners such as Marathon Digital have been holding onto their mined BTC and increasing their acquisitions.
This could potentially mean that the supply pressure from BTC miners is over.
Data from Into The Block shows that Miners’ Flow Volume Share, which tracks miners’ activity relative to the total on-chain volume, has decreased from a recent peak of 20% in May to below 10% in August. This indicates that the influence of miners on BTC prices has significantly diminished over the past three months.
This trend is further supported by a decrease in BTC sent from miner wallets to centralized exchanges as tracked by Miner Outflows.
After the April halving, BTC Miner Outflows increased between May and August. There were significant spikes of 16K BTC and 19K BTC moved to exchanges on May 21 and August 5, respectively. These were instances of supply pressure as miners sold part of their holdings to cover operational costs.
However, Miner Outflows have significantly decreased to 2.5K BTC at the time of reporting. This reduction in selling pressure from miners could potentially allow BTC prices to rally and reverse recent losses.
In terms of price analysis, BTC has had difficulty staying above $60K since the significant drop to $49K in early August. At the time of writing, it was attempting to reclaim the range-lows ($60.7K).
However, BTC was still in a bearish market structure as the price was below the 200-day SMA (Simple Moving Average). The 200-day SMA also coincided with the short-term supply near $63K.
Therefore, the prospects of further recovery for BTC could only improve if the supply area at $63K was cleared and turned into support.
