"Bitcoin miners are capitulating" and markets poised for more declines
Bitcoin returns on Wednesday to try to overcome the $30,000 level, after spending all Tuesday below this mark, as it was harshly rejected by the key level of $31,500. Experts are unanimous that the conquest of this level is essential for the digital currency par excellence to climb towards $35,000. As for the rest of the market, Ethereum once again tested $1,700, which is functioning as a market floor and the total capitalization sits above $1.2 trillion.
However, many experts indicated that price volatility and the constant rejection in all attempts of the most traded digital currency in the market to overcome its short-term resistance point to triggering a larger market capitulation to $20,000. This is evidenced by Glassnode data, specifically net unrealized profit/loss (NUPL), which is a measure of the network's overall unrealized profit and loss as a proportion of market capitalization. This metric indicates that less than 25% of this value is held in profit. "This has happened 3 times since 2015 and each time has led to Bitcoin miners capitulating with markets poised for further declines in the following months," commented Marcus Sotiriou, analyst at GlobalBlock.
The net position change of Bitcoin miners also shows that they have been net sellers over the past month, as their distribution (selling pressure) peaked at around 8,000 Bitcoins per month. Sotiriou stated that the behavior of this sector of the crypto-industry could be due to the fall in the price of the digital file par excellence, "which has decreased the profitability of miners".
However, he suggested not to be worried, as Intel is launching second-generation mining chips specific to the blockchain of Satoshi Nakamoto's creation, which are more efficient than those of most of its rivals. Cryptocurrency miner Hive Blockchain sold about 10,000 ETH to pay for Intel's Bitcoin mining equipment. These will go into mass production in early 2023, and potentially boost miners' profitability. "I believe this will be a catalyst for greater adoption of cryptocurrency mining globally, as it could help mining companies meet ESG (environmental, social and governance) goals," commented Sotiriou.
The analyst explained that the key factor in determining whether there will be further declines in the coming months is rising inflation. U.S. CPI data for May is released on Friday and the reading is expected to come in at 8.2% year-on-year, down 0.1% from April's CPI of 8.3%. This decline is not significant and the GlobalBlock expert stated that "we would have to see a more significant decline in price pressure for the US Federal Reserve to change course, and therefore see a sustained upside for cryptocurrencies."