Bitcoin stable at $17,000, but the miners could drive the price down to $14k
- Bitcoin miners are in distress and may soon capitulate by following on-chain data
- However, analysts remain optimistic that the bear market may end soon
Bitcoin (BTC) market recovery that has seen the benchmark cryptocurrency find some stability around $17,000 may face some sell-side pressure from Bitcoin miners going by on-chain data highlighted by crypto market analysis platform Glassnode.
Glassnode, in a tweet, shared that the Bitcoin protocol has just recorded a 7.3 percent decrease in mining difficulty – a metric that is a measure of how difficult it is to mine a Bitcoin block, or in more technical terms, to find a hash below a given target.
The drop in mining difficulty is the largest since July 2021 and is a response to the falling Bitcoin hash rate – which is the total amount of computing power dedicated to securing the Bitcoin network – notes Glassnode.
Glassnode adds that the drop in Bitcoin’s hashrate is due to miners being under “extreme stress” given the current market conditions of depressed coin prices, rising energy costs and debt burdens.
Meanwhile, the performance of the two metrics has also resulted in an inversion of the Bitcoin Hash tape technical indicator. The 30-day moving average (30DMA) of the metric has fallen below the 60DMA for the first time since June this year, indicating a possible capitulation by the distressed miners.
This difficulty adjustment is in response to drops #Bitcoin hash rate.
This has resulted in another inversion of the Hash bands, as the 30DMA dips below the 60DMA.
The last hash band inversion occurred in early June 2022.
Live Dashboard: pic.twitter.com/yu8674szjm
— glassnode (@glassnode) 6 December 2022
The BTC bottom may still be in
Despite the threat of miner capitulation, Glassnode analysts are still of the opinion that the bottom of the Bitcoin price may be in. According to Glassnode’s Week on Chain report, a number of metrics tracking the pace of sales and on-chain behavior are beginning to emerge. a reduction in factors that trigger strong sales.
One such calculation is the realized limit that suggests excess liquidity, including bad debt and over-leveraged entities, is being drained from the market as it is currently 2.6 percent higher than the May 2021 peak, indicating that the BTC market is becoming more mature.
“The realized rate for 2010-11 saw a net capital outflow equivalent to 24 per cent of the peak. The realized rate for 2014-15 experienced the lowest but still non-trivial capital outflow of 14 per cent. 2017-2018 recorded a decline of 16.5 per cent in the realized ceiling, the closest to the current cycle of 17.0 percent,” the analyst said.
The analysis claims that the Bitcoin price bottom may be in as investors move away from bearish extremes. Regardless, it admits that several potential downside catalysts remain.
