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According to miner statistics, Bitcoin may have reached a bottom

Bitcoin Up / Down
Image Credit: CRYPKYP
Source: CryptoSlate
1659952297 08 Aug / 09:51

Identifying the desired Bitcoin bottom involves more than a price analysis. Historically, miner data has been one of the most accurate predictors of market bottoms. Often regarded as one of the most resilient participants in the crypto ecosystem, miners only give up when Bitcoin mining gets too expensive.

Hash ribbons are a unique indicator for determining if the current market phase is bearish or bullish. The indicator includes the 30-day and 60-day simple moving average (SMA) of the Bitcoin hash rate. The 30-day SMA falling below the 60-day SMA indicates a bear market and that miners have begun to sell off their holdings.

According to the data, the market has been in a state of miner capitulation for about sixty consecutive days. Once the 30-day SMA exceeds the 60-day SMA, the worst of miner capitulation will be behind us. However, the gap between moving averages remaining motionless for days makes it difficult to predict when a trend reversal may occur.

Nonetheless, an analysis of miner balances indicates that the worst is gone and that miners have begun to recover. Miner balances examine the overall supply held at addresses belonging to miners to see if they have been trading off assets. According to Glassnode statistics, miner balances have rebounded from their June lows and are at their highest since October 2017. (highlighted in red).

In tandem with the recovery of balances, we’ve observed miner withdrawals from exchanges momentarily exceed inflows to exchange addresses (highlighted in black). This indicates that miners have withdrawn more BTC from exchanges than they have deposited for sale on the market.

The difficulty adjustment suggests that Bitcoin may have reached its lowest point. The difficulty adjustment, defined as the current projected number of hashes necessary to mine a block, increased by 1.7% for the first time since June. The uptick suggests that the Bitcoin mining difficulty may have reached its lowest point at the start of August. If Bitcoin can continue to maintain its price beside the $23,000 barrier, we may not revisit these mining difficulty lows for some time.

Lastly, another reliable market bottom indication appears to be flashing red. The Puell Multiple is an indicator used to evaluate mining likelihood by computing the ratio between the daily coin issuance in US dollars and the 365-day moving average of the daily coin issuance value. When the Puell Multiple is low, it indicates that miner profitability is below the annual mean. The indicator encourages miners to liquidate their treasuries when profitability is high.

The Puell Multiple has accurately identified prior cycle bottoms and flashing bottom signals in November 2011, January 2015, November 2018, and May 2020. The Puell Multiple has left the green zone for the first time since June and is slowly and gradually increasing. And even though the indicator has fluctuated in and out of the green zone throughout prior market cycles, the prognosis remains optimistic.

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