- Miner capitulation occurs when Bitcoin mining becomes less profitable and some miners have to exit the scene and liquidate their assets.
- Bitcoin halving could play a big role in this, as blockchain events literally cut the profitability of each successfully verified block in half.
- Analyst Ki Yong-ju believes a market rebound could occur if daily mining yields reach 40% of the annual average.
- Miners are currently receiving about 72% of their annual daily average, and the coming months are expected to be choppy.
What is a minor surrender?
Although the term miner surrender sounds a bit scary, it is a fairly normal cycle for the Bitcoin network. The theory is simple. As the profitability of BTC mining declines due to rising power prices and falling BTC value, some miners are forced to exit the industry.
As a result, miners may sell Bitcoin held in reserves to keep it afloat, putting downward pressure on the BTC price. A theoretical decline in Bitcoin prices could make mining unprofitable for even more participants. they such as selling.
This is not an unintended element of the BTC blockchain, as each spike in miner surrender typically occurs after a halving event. The idea is that some of the mining competition needs to be eliminated until Bitcoin can become profitable again. Once that happens, the market will rekindle and the Bitcoin price will reach a level that is consistently the highest since the halving.
Related: JP Morgan suggests March 2024 as possible peak for current bull market
Sideways movement continues – but long-term outlook remains bullish
Cryptocurrency analyst Ki Yong-joo said it will still take some time for the market to reach a “rock bottom” where profitability is reset and miners re-enter the market.
As Young Ju notes, surrender typically stops when the daily mining value reaches 40% of the annual average. For now, miners still earn nearly three-quarters of annual profits. According to this metric, the industry will likely have to endure some more mining carnage before entering another bull market.
However, it's worth noting that past market cycles are very different from Bitcoin's current cycle. Institutional involvement and changes in the regulatory landscape change the landscape forever, and what was true in the pre-ETF cycle may not be true in the post-ETF market.
Nevertheless, Ki Yong-joo's advice for navigating the current difficulties remains sound – avoid risk while maintaining a bullish long-term outlook.
