Bitcoin can rise due to stopping miners, this is why

Bitcoin can rise due to stopping miners, this is why

It is exactly two years ago today that bitcoin has reached the absolute high of 16,400 euros. And last year around this time, bitcoin plunged to the low of 2,700 euros. Times have changed, now we are over 120 percent above that!

But enough facts, what do we expect from the bitcoin course? In this analysis we look at the influence of bitcoin miners on the price.

Bitcoin rate drops by four percent in half an hour

Did you check the bitcoin course yesterday after dinner? Then you probably got a little shocked. Bitcoin fell by more than four percent in half an hour. Bitcoin is now worth more than two hundred euros less than the pinnacle of yesterday. How is that possible? Earlier today we wrote about PlusToken.

Up to the low of November?

The decrease seems to be less than expected when we zoom out on the graph. You look at the bitcoin rate from August to now. Each candle on the graph represents four hours.

The bitcoin rate still finds support on the falling trend line. The orange bar indicates the low of November. Will the race find support there?

The bitcoin rate still finds support on the falling trend line

Stopping miners can cause a rising course

The bitcoin price is the result of a balance between supply and demand on the market. But it is not only investors who speculate on the price. The price is also driven by the sale of bitcoin by miners

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Miners are people and organizations that use their computers to process transactions on the bitcoin blockchain. For this they receive a reward in the form of bitcoin. This reward consists of a fixed number of bitcoin and all transaction costs from the individual bitcoin transactions.

Is the rate falling fast in a short time? Then it is no longer profitable for some miners to mine bitcoin. The rewards they receive, for example, no longer cover energy costs. They then sell more and more of their rewards. If they do not succeed, they will sell everything. If this does not cover the costs, they must stop definitively. You call that miner capitulation.

You can see that on the graph below. The total computing power on the network, the hash rate, has decreased in recent months:

The total computing power on the network, the hash rate

It is often the small miners who first stop. These are, for example, individuals who have joined a mining pool. Or small mining companies with little buffer to absorb the losses.

And if not too many miners stop, that can even be positive for the race. There is then a lower sales pressure from miners who sell bitcoin on the market to cover their energy costs.

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Andy Cheung of the exchange OKEx also sees that. In an interview with CNN he said the following about it:

“We are aware of the relationship between the bitcoin price and the difficulty of mining. In the past, the price stabilized due to the lack of sales pressure from miners. In some cases, this even caused rising prices. “

He compares the movement of the computing power of today with a few years ago:

“In 2012 and 2019 there are indications that the bull market started after many miners were capitulated. That caused a kind of vacuum effect in the sales pressure. The price then flew up. What is special is that we are now in the second capitulation in the past 12 months. “

Mining capitulation on the graph

What does the mining capitulation look like on the bitcoin chart? Willy Woo can show you that. Woo analyzes the bitcoin price using fundamental factors. Consider for example the computer power on the bitcoin network, or the number of transactions.

Below you can see the difficulty ribbon. The lines indicate the difficulty of mining. The more computing power of miners on the network, the higher the difficulty.

The different lines are all moving averages of this difficulty. The thick red line is the 200-day moving average, the other lines indicate movements in the shorter term.

Will the lines go down and do they intersect? Then there is miner capitulation. That was the case last November.

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And it is striking that you now also see the first signs of miner capitulation. The upper red lines already cross each other.

The upper red lines already cross each other

But this does not necessarily lead to a sharply falling price, such as last November. As long as not too many miners stop, that can be a positive sign. The selling pressure then decreases, so that the price has room to rise.

You also saw that for example in 2011 up to and including 2013. First the miners capitulated. That caused a heavy downward movement. The rate then fell by 60 percent.

Then there was a second surrender, but this was less large-scale than the first. At the time, it led to less sales pressure, as a result of which the price found its way up.

sales pressure, as a result of which the price found its way up

The coming months will certainly be interesting to keep an eye on. Do we get a repeat of November last year? Or do the stopping miners actually lead to a rising course?


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