Bitcoin prices are currently experiencing a slight decline, cooling off from their May highs of almost $72,000. The cryptocurrency is down by around 10% from its all-time highs, with potential for further losses based on the candlestick pattern in the daily chart. This dip is believed to be primarily due to an ongoing “miner capitulation,” according to Willy Woo, a Bitcoin on-chain analyst. The network is currently getting rid of weaker miners, forcing them to shut down their operations and sell off their BTC holdings in large quantities.
The higher the supply of Bitcoin, the lower the prices, leading to a flushing out of weak miners as the cryptocurrency squeezes down. The impact of the Halving event, in which miner rewards were reduced by 50%, is becoming increasingly evident. This reduction in rewards has made it harder for miners to compete with larger, more efficient mining firms such as Riot Blockchain and Mara Digital, causing some to exit the business altogether. Despite weaker miners shutting down, the network hash rate, which measures total computing power, remains near record highs.
Woo believes that in addition to culling weak miners, there is a need to purge the excessive leverage trading and speculative bets in the market. Platforms like Binance, OKX, and Bybit have seen a spike in speculative trading, leading to an increase in “paper Bitcoin.” The analyst points to the collapse of FTX in November 2022 as an example of how purging speculative bets can lead to a swift recovery in Bitcoin prices in the following months.
The future price recovery of Bitcoin will depend on the clearance of the current “paper Bitcoin” overhang and the elimination of weak miners from the network. If speculative bets and weak miners are removed from the equation, it could potentially lead to a sustained increase in BTC prices. However, the immediate support for Bitcoin lies at $66,000, and if this level is breached, the cryptocurrency could experience a flash crash to $60,000 or even drop to its May 2024 lows of $56,500. It remains to be seen whether the current trends in the market will lead to a rebound in Bitcoin prices in the near future.
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