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Bitcoin Miners Facing Capitulation, Yet Encouraging Signs Emerge

Bitcoin miners are facing a period of capitulation, but there may be a silver lining amidst the challenges they are encountering. According to Ki Young Ju, the founder and CEO of CryptoQuant, the process of Bitcoin miner capitulation is ongoing and has not yet concluded.

Ju highlighted that historical data suggests that these capitulation phases typically come to an end when the daily average mined value reaches 40% of the yearly average. However, the current figure stands at 72%, indicating that the situation is still evolving.

The term “miner capitulation” refers to a scenario where cryptocurrency miners are struggling to maintain profitability due to decreasing returns. As a result, miners are compelled to sell off their Bitcoin holdings due to the combination of falling prices and transaction fees. While much attention is given to events like Mt. Gox’s repayments and the German government’s selling activities, the plight of miners is also a significant bearish factor in the market.

Recent data from Blockchain.com shows that the hashrate, a measure of the computational power used to mine and process transactions on the Bitcoin network, has dropped to 552 EH/s from its peak of 657 EH/s. This decline suggests that many miners are shutting down their operations.

CryptoQuant previously observed that substantial drops in hashrate have historically signaled potential market bottoms. Ju anticipates a period of relatively uneventful price action in the coming months but advises market participants to maintain a bullish outlook in the long term while exercising caution against excessive risks.

At present, Bitcoin is trading at $59,064 after reaching a peak of $59,322 earlier. Despite a recent dip below $54,000, the cryptocurrency has seen a recovery, partly driven by significant inflows into Bitcoin exchange-traded funds (ETFs), which recorded $216.4 million in net inflows on July 9.

Ju has previously described a “boring” Bitcoin market as an opportunity for buyers. The overall sentiment suggests that while short-term market conditions may lack excitement, there are still positive indicators for long-term investors to consider.