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Bitcoin Below $60k as Miner Capitulation Risk Looms Heavy

The end of the world as we know it? No.

Joe Consorti

May 1

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What’s up everybody. Today, I’ve got a straightforward analysis of bitcoin’s current price situation and where we’re headed if the tumult continues.

Bitcoin fell almost 9% today, and it’s now back down below $60,000 for the first time in two weeks. The timeline is overly bearish, as is usually the case on a near-10% intraday drop in bitcoin’s price, but it’s important to put this move in context. Bitcoin has been rangebound for entering 9 weeks, and this move is just a wick down to the bottom of the range. For now, we await and see if it bounces on this 4th retest or tries for the low $50,000 range, where the next support can be found:

This is the worst April in bitcoin’s history. This matters less for bitcoin than it would for stocks. Stocks have lots of seasonality due to quarterly earnings, so there’s more to glean from a comparatively bad month that was good in a year previously. Bitcoin’s cyclicality is less dependent on the four-quarter fiscal calendar and more in-line with the roughly four-year periods between halvings. A red monthly candle was inevitable given the (almost) seven green candles in a row. Still, a -16% month is nothing to scoff at:

Hashprice, miner revenue per unit of computing power per day, is at its lowest ever. It hit $46.55/PH/Day, which is down 74% from its post-halving peak. Miners had a brief reprieve following the halving as bitcoin’s price rose, but their profits are now being seriously crunched post-halving now that the spot BTC price is moving against them. There is light at the end of the tunnel according to mining derivatives—hashprice futures on Luxor are currently in contango, meaning futures price is above spot price, so traders expect an increase thanks to a rise in spot BTC in the coming months:

Miner capitulation risk is on the rise, with profits as squeezed as they are. If bitcoin’s price continues correcting downward over the next few days and it stretches into a weeks-long spell, big miners are at risk of having to liquidate a bunch of bitcoin on order to hedge themselves. Steve Barbour explains below:

If the price decline extends further than a few days or weeks, miners are at risk of having to shut their operations off entirely, cull underprofitable machines, and sell much larger chunks of bitcoin in order to keep the lights on. Hash Ribbons are our preferred indicator for when this happens. When the 30-day moving average of bitcoin’s hash rate crosses under the 60-day, it indicates miners are capitulating. Once the 30d MA crosses back above the 60d MA, shown when the ribbons switch from light red to dark red, capitulation is over and the price headwind of miner selling is no longer an issue. We’re approaching capitulation, as it looks like 30d is about to cross below the 60d:

Let’s further put this move in context by zooming much further out, as Adam Back suggested today (when he ratioed me). Bitcoin’s cyclicality is independent of stocks, of course, but this drawdown is insignificant for a different reason: it’s tiny compared to drawdowns during bitcoin’s previous bull runs. This drawdown is lower than % drawdowns we’ve experienced so far this cycle, and on par with drawdowns observed at the beginning of the last 4 bitcoin bull markets. Either this will be bitcoin’s smallest bull market yet and its second-shortest, or we have plenty of room to run. Zoom out, chill out, and put every move in context before feverishly smashing the sell button:

Bitcoin is growing more correlated with risk as it monetizes, not less. It is now truly a macro asset. The market traded like Powell is about to destroy everything tomorrow and take the pacifier out of the mouth of the crying toddler that is US asset markets. Bitcoin will unfortunately be caught up in such a scenario should the risk trade be fading. Given the size of both BTC and stocks’ % correction relative to their respective historical norms, there’s nothing to suggest this is anything more. All eyes on JPow.

Until next time,

Joe Consorti