No, Miner Capitulation Isn’t Why Bitcoin Dropped Yesterday (Opinion)

Bitcoin, after a massive rise to last year’s high, trimmed gains in a sudden selloff yesterday. YouTube-based BTC commentator Carl Martin a.k.a The Moon, opined that the cryptocurrency is experiencing selloff from miners.

But is that actually true? Is bitcoin dipping because of miner capitulation? Nope, there’s no tangible proof to corroborate the same.

Carl ‘The Moon’ Martin Thinks That Bitcoin Miners Are Capitulating

In a tweet, Carl Martin, who also goes by the name of ‘The Moon,’ claimed yesterday that bitcoin has entered into a ‘miners capitulation’ zone. Indeed, bitcoin miners are more than tempted to liquidate their mining rewards, given the epic price rush that catapulted BTC to last year’s highs.

The Moon, while explaining his bitcoin miner capitulation stance, pointed out the ‘capitulation candle’ and commented about the hash ribbon turning bearish. But he also added that buying BTC based on this ‘indicator’ has been extremely profitable, and this is no spot for him short the cryptocurrency. How credible are Mr. Moon’s claims, though?

Miners Are Busy Milking The BTC Transaction Fee Spike

Transaction fees on the Bitcoin network have undergone an unprecedented spike. According to the on-chain analytics platform, Glassnode, the recent BTC price run, especially the $2000 spike from sub $12k levels to $13,800, caused transfer fees to surge by 573 percent. Miner revenue from this fee spike led to an almost 23 percent increase just on Tuesday itself, and it was the highest recorded number since January 2018.

This is a direct result of the mempool being clogged with unconfirmed transactions. The Bitcoin network can process only 1MB of transactions per 10 minutes. The mempool clog caused the blockchain jam, resulting in the network logging 121,340 unconfirmed transactions (66.8 MB) last Tuesday.

So, the argument of ‘miner capitulation’ falls flat since Bitcoin miners are already milking the huge transfer fee spike. Their revenue counter is already smiling back at them. Also, noted on-chain analyst Willy Woo said that fees on the Bitcoin base chain would continue to increase in the near future.

I’m looking forward to Bitcoin fees increasing on the base chain. It is very directly linked to demand, and increases its store of value properties by making Bitcoin harder to attack; especially as block reward reduces in the future. https://t.co/nABE7biVPT pic.twitter.com/GfUQWtYSS7

— Willy Woo (@woonomic) November 2, 2020

Plus, miners capitulate only when bitcoin mining becomes unprofitable, as a commentator on The Moon’s tweet pointed out.

Miner capitulation occurs in the Bitcoin market when mining is no longer profitable. As profitability drops, miners naturally sell their Bitcoin holdings, capitulating as a response to worsening market sentiment. If miners begin to sell off, it creates significant selling.

Hash Ribbon Bearish Not Because Of Capitulation But Miner Migration

Carl Talked about the bitcoin mining hash ribbon flipping bearish in his recent analysis video. Apparently, he seemed to have misinterpreted it as a ‘minor capitulation signal.’ But that’s not the actual scenario. The bearishness of the indicator is due to the drop in bitcoin’s mining hash rate.

And it did drop further. Just today, Bitcoin recorded its second-largest negative difficulty adjustment in history.

As discussed by CryptoPotato last week, Chinese bitcoin miners are moving out of Sichuan. Typically the country’s BTC minters migrate here to leverage the province’s cheap hydro-electric power as the rains raise water levels. Which, in turn, swells the profit margins of miners.

According to data from the University of Cambridge’s Bitcoin Electricity Consumption Index, Sichuan accounted for 18.5% of Bitcoin’s global hash rate in spring this year. The mass miner exodus after rains causes a drop in this number.