Bitcoin miner capitulation comes as it always does come what may. You can’t escape it whatever you try to do. A cryptocurrency analyst, Charles Edwards, recently spotted a bearish inversion in the health of Bitcoin networks hash rate through the Hash Ribbons. This can greatly affect the cryptocurrency market and if the history repeats itself, the prices are gonna stoop even lower for the next coming days, even weeks.
What does Bitcoin miner capitulation mean?
Before we discuss the assumable turnout of current conditions, let us know what bitcoin miner capitulation is.
Capitulation translates to surrender. The miner capitulation is when miner operations slow down because of the shutting down of mining by small scale miners who do not have much capital. Technologically speaking, their mining machines become outmoded.
When this occurs, the miners are unable to earn anymore and hence, cannot upgrade their systems according to the future needs anymore more which leaves them with no choice than to sell their mined Bitcoins (BTC) to keep going on.
This does not sound innoxious at all. It is reasonable to understand that miners will need to sell their bitcoins to keep with their expenses. But what happens if the majority of the miners sell at once? This can lead to a vicious cycle as Cole garner, an analyst, says
“Undercapitalized miners panic sell, price dumps, longs get squeezed, stop losses cascade – then more miners lose their lunch.”
Inversion of the Hash Ribbons, which approaches bearish threshold signals that capitulation is happening at the moment the number of active miners is decreasing.
Where is Bitcoin headed?
Historical analysis indicates that, according to the data, the cryptocurrency market is going to suffer in the coming time. In 2018, when bitcoin price nearly halved from 6000 USD to 3000 USD, the Hash Ribbons had inverted just a few days ago, according to NewsBTC. Not only that, but Cole Garner also pointed out that the inversion of Hash Ribbons that occurred in 2016 also resulted in a 30% decline as well.
However, it is important to note that the 30% drop might also have occurred due to some other reasons as has occurred in 2012 when macro bull trend caused mini capitulation events and the price dropped down to 10-20% for a brief period.