The crypto sphere was buzzing with excitement before the green light for spot Bitcoin exchange-traded funds (ETFs). The expectation was a bullish surge, especially after the US Securities and Exchange Commission’s (SEC) approval for 11 spot BTC ETFs. However, contrary to predictions, prices took a downturn following the trading debut of eight of these ETFs. Bitcoin, which had surpassed the $49,000 mark, is now hovering below $43,000, seemingly trapped within a tight trading range for over two weeks. To cope with the situation, miners have resorted to offloading a significant amount of their BTC holdings. Despite this development, concerns about capitulation seem minimal.
For miners, mining rewards represent their main source of income, accounting for over 80% of their earnings. Therefore, any drop in Bitcoin’s price or an increase in the hash rate can lead to higher mining expenses, such as electricity and time, making it challenging for miners. Consequently, they are generally more responsive to market changes compared to investors. However, miners also exhibit strong resilience. The Hash Ribbon provided by CryptoQuant, which analyzes the Hashrate 30DMA and 60DMA to detect miner capitulation and market rebound, has not indicated a death cross despite the recent downward adjustment. This indicates that the current adjustment does not signal miner capitulation.
Miner Capitulation: Insights from the MPI Index
By examining previous bear market lows and bottoms, CryptoQuant’s on-chain intelligence platform identified an MPI index level of 4.0 as the threshold for miner capitulation selling. However, the recent adjustment does not meet this threshold, suggesting that capitulation is not a significant concern. Although the MPI experienced a notable uptick in 2023 due to mining industry efforts to sell Bitcoin during the bear market, the market has since recovered, and miners have already bolstered their financial standing. This implies that they are prepared to withstand possible further corrections in the Bitcoin market.
Mining Profits and the Impact of Transaction Fees
In 2023, Bitcoin miners experienced substantial profits due to a surge in transaction fees. These fees reached their highest levels since April 2021, primarily driven by increased demand for Ordinals inscriptions. The positive market momentum throughout the year provided a significant recovery for miners, offsetting the challenges faced during the unfavorable conditions of 2022. As a result of the market recovery, miners offloaded a substantial amount of their stash. This selling activity continued leading up to the introduction of spot Bitcoin ETFs, which was anticipated to have a notable effect on the market.
Miners and Short-Term Investors: Selling Activity
Bitcoin miners were not the only ones selling their holdings. Short-term Bitcoin investors also joined in, although they were selling at a loss. In contrast, Bitcoin whales perceived this selling activity by short-term investors as an advantageous buying opportunity. Consequently, they acquired the assets being sold, leading to a relatively stable market despite the ongoing selling activity.
The current status of the Bitcoin market reflects a period of caution and a wait-and-see approach. With the introduction of spot Bitcoin ETFs and the selling activity by miners and short-term investors, market participants are assessing the situation. The lack of significant capitulation and resilient miners provide some reassurance. However, it remains to be seen how the market will react in the coming weeks. Bitcoin’s price and the behavior of market participants will be key factors to monitor as the crypto sphere continues to evolve.