Bitcoin miners' surrender signal, hash rate drops 15% compared to October

Hash rate, which indicates the computing power of the Bitcoin network, has recently experienced a sharp decline. A widespread capitulation among miners is underway, which is seen as an important signal for the global cryptocurrency market.

Mining Profitability Deterioration Accelerates Miner Selling

The computing power of miners responsible for network security has dropped from a peak of approximately 1.1 Zetta hashes per second (ZH/s) in October to current levels of 977 Exa hashes per second (EH/s). This represents a decline of about 15% from the October peak, indicating a significant deterioration in mining profitability.

As margins shrink, miners find it difficult to operate unprofitable mining equipment. Many miners have started selling their held Bitcoin to raise funds, and this miner selling pressure is putting short-term supply pressure on the market.

Difficulty Continues to Decline, 7 of 8 Adjustments Negative

Mining difficulty is automatically adjusted to maintain block creation times at around 10 minutes. In the January adjustment, difficulty is expected to decrease by about 4% to approximately 139 trillion (T). This is the seventh negative adjustment out of the last eight adjustment cycles, showing ongoing deterioration in the mining environment.

A continuous decline in difficulty means the number of participating miners and equipment is decreasing. While this is a natural process of phasing out inefficient mining operations, in the short term it also signifies a large-scale capitulation within the mining community.

Significance of Miner Capitulation Seen Through Hash Ribbon Indicator

Glassnode’s Hash Ribbon indicator tracks miner capitulation by comparing the 30-day and 60-day moving averages of hash rate. This indicator inverted in November, shortly after Bitcoin’s price bottomed near around $80,000.

When the Hash Ribbon inverts, miners are forced to sell large amounts of Bitcoin to cover operational costs. While this exerts short-term supply pressure on the market, from a contrarian perspective, it is an important signal.

Historically, such miner capitulation periods do not last long. When the 30-day moving average crosses back above the 60-day moving average, it signals that the worst phase of selling despair has passed, and price momentum tends to recover afterward. Currently, there are about 60 days remaining in this trading cycle.

Additional Selling Pressure from AI-Transition Miners

Another source of selling pressure comes from mining companies shifting to AI and high-performance computing (HPC) businesses. Large mining firms like Riot Platforms are actively selling Bitcoin to fund capital-intensive AI infrastructure investments.

This portfolio reorganization reflects a shift beyond simple mining efficiency issues, indicating structural changes in the industry. As institutions reallocate assets, believing that the future value of high-performance computing outweighs Bitcoin mining, they exert structural selling pressure on the Bitcoin market.

Limited Hedge Role of Bitcoin Amid Dollar Weakness

Interestingly, despite recent weakness in the US dollar, Bitcoin has not shown unusual strength. JPMorgan strategists analyze that the current dollar weakness is driven by short-term liquidity changes and psychological factors, not a sustainable macro trend.

With expectations that the US economy will strengthen and currencies will stabilize, the market finds it difficult to trust the dollar’s weakness. As a result, Bitcoin is being traded more as a liquidity-sensitive risk asset rather than a reliable dollar hedge, with gold and emerging market assets benefiting most from dollar diversification.

Paradoxical Opportunity in Miner Capitulation

While the current decline in Bitcoin’s hash rate and miner capitulation appear as short-term bearish signals, historical patterns suggest this could ultimately herald a bullish phase. The exit of inefficient mining infrastructure and the exhaustion of selling pressure may lead to a stronger network restart. Bitcoin’s current price is around $88,090, and the upcoming approximately 60-day trading cycle is expected to be a critical decision-making period.