With BTC near $70K and average mining cost at $87K, miners are selling holdings to cover operations.
Bitcoin miners are caught in a profitability squeeze as the cryptocurrency trades roughly 20% below its estimated average production cost.
According to data from Checkonchain, the average cost to mine one bitcoin has reached approximately $87,000, while spot prices have fallen toward $70,000. This marks a 20% gap between production costs and market price, a situation historically associated with bear markets.
The pressure is forcing miners to sell their bitcoin holdings to fund day-to-day operations, cover energy expenses, and service debt obligations. This ongoing miner capitulation highlights persistent stress across the mining sector, with profitability dropping to a 14-month low.
When bitcoin trades below production cost, it typically signals a market bottom is forming or that prolonged bearish conditions are ahead. Miners operating at a loss cannot sustain operations indefinitely, leading to either shutdowns or forced selling that adds further downward pressure on prices.
This dynamic creates a potential feedback loop: lower prices force more miner selling, which can push prices even lower. However, miner capitulation phases have historically preceded major market recoveries, as weaker operators exit and hash rate adjusts to more sustainable levels.
The hash rate and difficulty adjustments will be key indicators in coming weeks. If significant mining capacity goes offline, the network difficulty will decrease, potentially restoring profitability for remaining miners. Market participants should also monitor miner wallet flows and exchange inflows for signs of capitulation peaks.
The mining sector stress underscores the severity of the current market downturn. While painful for miners, such capitulation phases have historically preceded major market recoveries, though past patterns do not guarantee future performance.
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Disclaimer: News content is for informational purposes only and should not be considered financial advice. Market conditions can change rapidly. Always conduct your own research.
