25 Oct 2022

Miner capitulation ala 2018 is highly unlikely

Fears of a miner capitulation ala 2018, due to growing hashrate, are overestimated. The hashrate has grown at a predictable rate in 2022. There has already been a miner capitulation this summer, and there is no fork war.
Source: *As of Oct 23 (both 2018 and 2022)
BTC production per TH in 2018 was highly unpredictable. This was mainly due to the very high hashrate growth. The hashrate increased close to 300% in 2018, while it has “only” increased 30 % so far this year.We’ve already experienced a miner capitulation. This summer, miners sold way more BTC than what they generated, drawing down on their inventories. Selling more than they produced is what marked the capitulation in 2018. There are no current reasons for bitcoin miners to engage in costly blockchain politics. In 2018, some bitcoin miners incurred tens of millions of dollars in losses from participating in the BCH-BSV fork war. The two camps competed over having the most hashing power as a symbol of presumed strength. BTC inventories were drawn down to finance this meaningless war.
Public miners back to expanding their BTC balances
Miner’s financial conditions show signs of improving as public miners have resumed expanding their BTC inventories. Public bitcoin miners sold 68% of their monthly BTC production in September, suggesting that financial conditions are improving for public miners.
Source: Luxor
Public miners were in a state of capitulation this summer. In this period, they sold far more BTC than they produced, peaking in June as public miners sold 350% of their monthly BTC production.These funds were funds set aside for long-term exposure in BTC. In each month this year up until May, miners held onto more than 50% of their BTC production. Thus, miners were forced to sell in pressured markets at a far lower price than the production price.Miners spent the summer improving their debt situation. We’ve seen mining companies restructuring their debts and bolstering their balance sheets, most notably with Stronghold slashing its debts by more than 60% in August.The market is currently less exposed to massive selling pressure from public miners. Public miners hold near 37,000 BTC today, down from 46,000 BTC by the end of April.
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