Despite the drop in hashrate, Bitcoin miner selling isn’t correlated with the BTC price drop from $71,100 to $66,000.

The recent breakdown of Bitcoin’s hashrate from an 18-month uptrend has sparked discussions about the potential implications for the Bitcoin mining sector and the broader cryptocurrency market. Here’s an analysis of the situation based on the available data and insights:

Bitcoin Hashrate Breakdown

Hashrate Decline:
- Bitcoin's true hashrate fell to around 600 exahashes per second (EH/s), marking the end of an 18-month upward trend.
- Hashrate is a measure of the computational power used in mining and indicates the network's security and miners' activity levels.

Potential Causes:
1. Miner Capitulation:
- Some speculate that the decline in hashrate may signal miner capitulation, where mining firms are selling their Bitcoin holdings due to reduced profitability.
- Ki Young Ju, CEO of CryptoQuant, suggested this possibility, noting the break in the upward trend of the hashrate.

2. Shutdown of Older ASIC Miners:
- Another explanation could be that mining firms are shutting down older generation ASIC mining rigs, which have become unprofitable following the fourth Bitcoin halving.
- Increased costs of mining, including higher electricity prices, contribute to the reduced profitability of these older models.

Miner Behavior and Market Impact

Miner Selling:
- Despite the drop in hashrate, data shows that Bitcoin mining firms have not been selling significant amounts of Bitcoin recently.
- Miner flows to cryptocurrency exchanges have decreased, indicating that miners are not offloading their holdings en masse. For example, flows fell from a peak of 15,470 BTC on May 21 to 7,239 BTC on June 13.

Bitcoin Price Movement:
- Bitcoin's price fell from over $71,100 on June 5 to approximately $66,800. However, this price drop does not appear to be directly linked to miner selling, as miner flows to exchanges have continued to decline.

Future Outlook and Challenges

Hashrate Projections:
- An April 19 report by CoinShares predicts that the Bitcoin hashrate will rise to 700 exahash by 2025. However, this projection includes a potential 10% drop after the halving as unprofitable ASICs are turned off.

Electricity Costs:
- The profitability of Bitcoin mining is heavily dependent on electricity costs. Older ASIC models like the S19 XP and M50S++ become unprofitable with electricity costs above $0.09 per kilowatt-hour. Models such as the S19j Pro+, j Pros, and M30S++ struggle at costs between $0.06 and $0.07 per kilowatt-hour.

Market Reactions:
- The Bitcoin community and market participants are closely watching these developments. The decline in hashrate and its potential implications for miner behavior and network security are key areas of focus.

Conclusion

The breakdown in Bitcoin’s hashrate marks a significant shift after an 18-month uptrend, raising concerns about miner capitulation and the sustainability of older mining rigs. While miner selling does not appear to be the primary driver of the recent price drop, the profitability challenges posed by increased mining costs and the halving are crucial factors. Future projections indicate potential growth in hashrate by 2025, but the industry must navigate the immediate challenges posed by profitability and operational costs.