The Bitcoin mining industry is facing challenges. This could be a bullish sign for Bitcoin's price, based on historical data.
Bitcoin's total hash rate has declined. It dropped from 658 exahashes per second (EH/s) in late May to 556 EH/s on June 28. This data comes from Hashrate Index.
Hash rate measures the effort used to secure the Bitcoin network. It also indicates mining competitiveness.
The Bitcoin network has responded. It adjusted its block-mining difficulty down 7.8% this weekend. The difficulty dropped from 83.68 terahashes per second (TH/s) to 79.50 TH/s.
Such large drops are rare in Bitcoin's history. The last comparable decline occurred in December 2022, after FTX's collapse. That period saw major mining companies default on debts. It also marked Bitcoin's price bottom after a year-long bear market.
CryptoQuant CEO Ki Young Ju commented on the situation. "Miner capitulation is still ongoing," he tweeted on Tuesday. He added, "Historically, it ends when the daily average mined value is 40% of the yearly average; it's now at 72%."
CryptoQuant recently reported on this trend. Their report noted that "miner capitulation" has historically signaled a bottom in Bitcoin prices. This suggests that monitoring miner health could be crucial for traders.
Miners' income depends largely on Bitcoin's market price. The recent price pullback since March has significantly reduced mining industry revenue.
The Bitcoin halving in April has been a major challenge for miners. Vincent Maliepaard from IntoTheBlock told Decrypt, "Bitcoin miner reserves decreased by roughly 20k BTC since June. The Bitcoin halving two months ago might be a driver behind the recent miner sell-off as margins have decreased since then."
Bitcoin's "hashprice" has hit all-time lows in the past three months. This metric measures mining industry profitability per unit of work.
Compass Mining provides some context. They state that such low profitability periods typically last 6 to 12 months after a halving event. These periods often see mining companies upgrading their hardware.
CJ Burnett from Compass Mining confirmed this trend. He told Decrypt, "Large public miners are still actively purchasing the latest generation miners to drive fleet efficiency, economies of scale, gross margin, and ultimately their stock price."