Bitcoin Drops Below $8,800 – BTC Miner Capitulation Is Underway
Bitcoin‘s price is dropping since the day before, and at the moment of writing this article, the most important coin out there is trading in the red.
BTC is currently priced at $8,787.05.
Bitcoin miners are switching off their rigs
An important part of Bitcoin miners are now switching off their rigs in the response to the halving.
The process is known as capitulation, and it happens when miners can not make a profit by outpacing the electricity and maintenance costs that are required to power the network.
Glassnode crypto analytics firm Glassnode confirmed that the halving which implemented a 50% drop in the mining rewards also triggered a 50% drop in the amount of the processing power that’s dedicated to powering the network.
The fears of a mass capitulation of Bitcoin miners due to a massive loss of revenue have persisted for a while.
The scenario could trigger a death spiral that could bring transactions speeds really low – this lowers the confidence in the network and drags down the price of BTC.
Adjusting the processing power
It’s also important to note the fact that when there are fewer machines that are battling to earn BTC, the network adjusts how much processing power is required in order to confirm the transactions.
Glassnode said that the 6% difficulty adjustment that began last week is having an impact.
“[Bitcoin’s declining hash rate] is slowing and gradually reversing, as Bitcoin just experienced a downward difficulty adjustment, making mining slightly more accessible for smaller players again,” according to Glassnode.
They continue and say that the effects of the halving on the miners are mitigated by an increase of fees – this is because miners prioritize transactions that offer high fees in order to make up for the shortfall.
We recommend that you check out more info from Glassnode in their official notes.
It’s also worth noting that after the halving from back in 2016, BTC fell by 30%.
CoinMarketCap is a website that provides cryptocurrency market cap rankings, charts, and more. It was purchased by Binance for $400M in 2020.
Eduard Watson Author
An experienced finance writer for more than 10 years, active industry watcher, and gadget enthusiast.