Crypto investors have been feeling a kind of déjà vu with the sluggish price of bitcoin having barely budged for months now. However, data shows demand for the cryptocurrency has slowly been returning and could soon be reflected in prices. Bitcoin has been wrestling with $70,000 for much of this year, its struggle was exacerbated when miners began selling their bitcoin in greater amounts last month, seeking to cover operating expenses following weeks of depressed transaction fees and the slashing of miners’ block reward at the halving . Some larger mining companies have started using their bitcoin reserves to earn yield or hedge their exposure. Now, “miner capitulation,” as the forced selling is often called, has reached levels comparable to December 2022, which marked a 7.6% drawdown in the Bitcoin network hash rate – or the total computational power used by miners to process transactions – and the cycle bottom after the FTX collapse, according to CryptoQuant. “Miner capitulation has historically marked price bottoms, given that it signals prices are too low for the least efficient miners to be profitable,” Julio Moreno, head of research at CryptoQuant, told CNBC. “After halvings, a drawdown in network hash rate of around 7%-12% has marked the bottom and preceded price rallies. Currently we have a drawdown of 7.7%.” The increase in bitcoin price, however, will depend on growing demand for bitcoin, which usually increases before showing up in prices, he added. Demand slowed this year after a 66% rally in the first quarter, but CryptoQuant data shows that trend has reversed. “Whale demand is growing at 6% month-over-month currently,” Moreno said. “This is typically a high growth rate, so we are already in a high demand growth environment. … Last February-March, prices rallied stronger when demand growth surpassed 6% month-over-month growth.” In the past, he added, “demand has peaked at 10%-12% month-over-month rate, so there is still room to go.” Bitcoin is down 8% for the past three months but still up 44% for the year. Many investors are still confident that bitcoin has more upside catalysts down the road – including spot ether ETFs, rate cuts in the U.S., and clearer rules of the road for the industry after the U.S. presidential election. Additionally, bitcoin cycle peaks tend to take place as much as 18 months out from the halving. BTC.CM= 3M mountain Bitcoin (BTC), 3 months “What past cycles have taught us is to expect nothing in the immediate aftermath of the Bitcoin halving,” said Nexo co-founder Antoni Trenchev. “Bitcoin barely budged for 4-5 months after the 2016 and 2020 halvings, and we had to wait a good six weeks for some price excitement back in 2012.” “Given the 2024 halving only happened in April, it wouldn’t be a shock to experience more sideways snooze,” he added. “The door to a $100,000 bitcoin remains open in 2024 as the period of consolidation since March lays the foundation for the next leg upward.”
