Bitcoin Capitulation - Mining Death Spirals
Why miner capitulation occurs?
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 pressure in the market. Such pressure creates a difficult environment for major cryptocurrencies like Bitcoin to maintain their momentum.
Large mining centers and companies are unlikely to capitulate due to a short-term price slump, as they hold long-term contracts with electricity providers. They also have more capital to deal with instability in the market for an extended time period.
Meanwhile, short-term capitulation among smaller mining companies is likely. Major mining firms closing down one after another could lead to a death spiral in which the Bitcoin network’s hash rate drops to near-zero.
However, as security and cryptocurrency researcher Andreas Antonpoulos said, a death spiral or an abrupt drop in the hash rate of the Bitcoin network to near-zero is not likely to happen because miners operate with long-term perspective and strategy. He explained, “Part of the reason that’s unlikely to happen is that miners have a much more long-term perspective.”
Hence, when short-term miner capitulation occurs — similar to middle 2016; late 2018; middle 2019 — the market tends to recover in six months to a year. Currently, it is still premature to predict whether miner capitulation will occur heading into the year’s (2020). However, if negative sentiment around the market is carried onto the first quarter of 2020, a December 2018-esque capitulation could occur in the upcoming weeks.
Halving won’t have an immediate effect
One of the most highly anticipated events of BITCOIN It happened in May, (03/11/2020). Is the block reward halving of Bitcoin. The mechanism, which gets triggered once every four years, would effectively drop the compensation miners receive for mining blocks that contain BTC transactions by half. It also decreases the rate of new BTC production as the network approaches its fixed supply of 21 million Bitcoins.
Since 2018, the halving has been talked about as the next driving factor of an extended Bitcoin rally. As a scarce asset, any event that decreases the supply of the cryptocurrency would theoretically impact its price trend. However, high profile investors have said that the halving is not likely to have any immediate effect on the Bitcoin price.
If the halving occurs without imposing a positive impact on the price of Bitcoin, it would place additional pressure on miners to adopt better infrastructure and efficient equipment to try to further decrease the costs.
Throughout history, the halving has not led to a large rally for Bitcoin until a year or two after the event, possibly because it is priced in well before the event occurs. As such, it is possible that the capitulation of small miners lead to BTC testing lower level supports in the $5,000 to $6,000 region despite being down substantially since mid-2019, creating negative sentiment around the cryptocurrency market in 2020.
Why miner capitulation occurs?
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 pressure in the market. Such pressure creates a difficult environment for major cryptocurrencies like Bitcoin to maintain their momentum.
Large mining centers and companies are unlikely to capitulate due to a short-term price slump, as they hold long-term contracts with electricity providers. They also have more capital to deal with instability in the market for an extended time period.
Meanwhile, short-term capitulation among smaller mining companies is likely. Major mining firms closing down one after another could lead to a death spiral in which the Bitcoin network’s hash rate drops to near-zero.
However, as security and cryptocurrency researcher Andreas Antonpoulos said, a death spiral or an abrupt drop in the hash rate of the Bitcoin network to near-zero is not likely to happen because miners operate with long-term perspective and strategy. He explained, “Part of the reason that’s unlikely to happen is that miners have a much more long-term perspective.”
Hence, when short-term miner capitulation occurs — similar to middle 2016; late 2018; middle 2019 — the market tends to recover in six months to a year. Currently, it is still premature to predict whether miner capitulation will occur heading into the year’s (2020). However, if negative sentiment around the market is carried onto the first quarter of 2020, a December 2018-esque capitulation could occur in the upcoming weeks.
Halving won’t have an immediate effect
One of the most highly anticipated events of BITCOIN It happened in May, (03/11/2020). Is the block reward halving of Bitcoin. The mechanism, which gets triggered once every four years, would effectively drop the compensation miners receive for mining blocks that contain BTC transactions by half. It also decreases the rate of new BTC production as the network approaches its fixed supply of 21 million Bitcoins.
Since 2018, the halving has been talked about as the next driving factor of an extended Bitcoin rally. As a scarce asset, any event that decreases the supply of the cryptocurrency would theoretically impact its price trend. However, high profile investors have said that the halving is not likely to have any immediate effect on the Bitcoin price.
If the halving occurs without imposing a positive impact on the price of Bitcoin, it would place additional pressure on miners to adopt better infrastructure and efficient equipment to try to further decrease the costs.
Throughout history, the halving has not led to a large rally for Bitcoin until a year or two after the event, possibly because it is priced in well before the event occurs. As such, it is possible that the capitulation of small miners lead to BTC testing lower level supports in the $5,000 to $6,000 region despite being down substantially since mid-2019, creating negative sentiment around the cryptocurrency market in 2020.
Comment:
Capitulation starting July 9, 2016 - Finishing August 7, 2016
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# Mining Death Spirals - May 2020 -
The Bitcoin (BTC) halving is occurred on 11 May 2020.
When bitcoin has halved in the past, price fluctuations usually follow.
11 May, 2020: third halving event means that the reward for unlocking a "block" has been cut from 12.5 new coins to 6.25. Halving was written into the cryptocurrency's code by its creator, who is known as Satoshi Nakamoto, to control inflation. This is the third halving since Bitcoin's
The Bitcoin (BTC) halving is occurred on 11 May 2020.
When bitcoin has halved in the past, price fluctuations usually follow.
11 May, 2020: third halving event means that the reward for unlocking a "block" has been cut from 12.5 new coins to 6.25. Halving was written into the cryptocurrency's code by its creator, who is known as Satoshi Nakamoto, to control inflation. This is the third halving since Bitcoin's
Comment:
Capitulation starting 11 May, 2020 - Finishing ???
July 9, 2016: Second halving takes mining reward down to 12.5 BTC.