In the crypto community this now is a well acknowledged fact, after the halving of bitcoin on the 11th of May the condition of miners has worsened to a significant level. Investors all around the world are fearing the global miner capitulation.
The process of “miner capitulation” is an occurrence in the crypto fraternity or more specifically the market where bitcoin mining becomes an unprofitable deal. The rewards that are received by the bitcoin miners reduce to a very low level, which eventually make the process of mining unprofitable because the operational cost is much higher.
The event of “miner capitulation” usually happens because of few probable reasons; either it happens because of the price correction of the bitcoin, either there is a network difficulty adjustment or it could be block reward halving which is much significant if we take in comparison the rest of the reasons.
Though the experts had clearly stated that this is one of the most brutal bitcoin halving that has ever happened in the history of bitcoin. Charles Edwards a popular digital asset manager said
“ This will be the most brutal Bitcoin Halving in history.
Production cost is about to double to $14,000.
70% above the current price.
Last halving, price was just 10% below Production cost, and Price & HR collapsed -20%.
Without FOMO now, expect a big miner capitulation. 30%+ ”
Bringing our focus back to miners, now what happens is when miners become unprofitable, the pressure starts to build on the miners to liquidate the bitcoins that they had been rewarded just to keep their businesses up and running, because it is obvious that there are operations costs such as the electricity, rentals, and many more. Now there were even various speculation that, after the block rewards of the miners are cut in half it would eventually push them to shut down, as a result the prices of cryptocurrencies will go down.
At this time, the effect on the prices of various cryptocurrencies especially bitcoin has not been very evident and to add if we evaluate the data the miner capitulation has begun.
Conner Brown says “This past week miners have sold 673 more bitcoin than were generated. We are seeing capitulation from inefficient miners, but prices are holding steady. What do you think happens when these miners are finally shaken out?”
But the big question here is if it has really begun, then why can’t we see drop in bitcoin prices ?
There could be some very clear reasons for that. One, various institutions have been saving bitcoins since the halving as every one might have figured out that the rise of prices are imitant and what could be the best time to generate some good profits. Second, the chinese currency began to tremble and began its down-roll as compared to the US dollar after Hong Kong’s special trade deal was put off. Third, it could be cheaper electricity rates in China and across the world, less demand for energy amidst the Covid-19 crisis. Fourth it could be Bitcoin mining difficulty adjustment. Well there could be various other reasons as well, and for the time being these are all just speculated reasons, but soon we’ll have stronger trends to point in the particular direction.