A miner capitulation event, which often occurs before market bottoms, appears to have taken place, according to on-chain statistics. Additionally, the Ethereum hash rate is decreasing, which forces miners to sell their remaining funds to cover operating costs. As a result, BTC is currently trading at $20,995.61, a 3 percent increase over yesterday, while ETH is trading at $1,205.39, a 10 percent increase.
Revenues Drop, Difficulty Remains High
Revenue from miners has decreased from about $0.40 in October 2020 to $0.09 today. Since October 2020, its number has fallen to its lowest point. A 60 percent annual fall in hashrate is the fastest since the pandemic selloff in March 2020. Hashrate has also collapsed. The decline in revenue for miners is accompanied by an increase in mining difficulty, which has driven up the cost of doing business for miners.
Miners are currently in the “highly underpaid” zone due to declining revenue and high mining difficulty levels. This graph displays the revenue and miner difficulty for the last 30 days.
Forced to Sell, Miners
Miners have begun selling bitcoin as a result of its falling profitability. As a result, the number of bitcoins they sent to exchanges this month, 23K, was the biggest monthly total since May 2021.
Over 5K bitcoin, or about $110 million, were delivered to Binance daily by certain Poolin miners. This transaction may indicate that some of them have revenue levels below their break-even point.
A probable capitulation event, which often comes before a market bottom, is indicated by the abrupt increase in the flow of transactions from miners to exchange. When prices fell, this incident took place.
Hashrate for ETH drops by 10%
Because of the reduction in the hashrate, a measure of computational activity, fewer people were mining Ethereum in April.
Due to the ongoing slide in the price of ETH, the value of mining profits has decreased dramatically. The processing power of miners has decreased as a result. As a result, the amount of mining activity so far this year has decreased to about 900 TH/s.
The cost of Ethereum has decreased by more than 75% during the past three months. The worldwide economic recession is to blame for this decision. Additionally, there have been substantial withdrawals from cryptocurrency-based investment instruments.
The rise in energy prices is another element that has negatively impacted the mining sector. The energy price index, which gauges energy cost, increased to a five-year high in May, according to Ycharts. The geopolitical environment in Russia and Ukraine is blamed for this surge in the index.
Bomb With Pending Difficulty
One aspect causing the Ethereum network to deteriorate is the impending difficulty bomb. It takes away the motivation for miners to produce new coins. Furthermore, the network won’t improve until September 2022 because 700,000 blocks have delayed this phase.
Implementing the eagerly awaited Ethereum update known as the merge will need the use of the difficulty bomb. Proof-of-Stake will replace the network’s Proof-of-Work due to this process. The network will be upgraded to become quicker and more energy-efficient.
The Ethereum transition is garnering more and more support from its supporters. Nansen claims that there have been a lot more ETH2 deposits recently. The contract had about 12 million tokens, and 75,400 depositors took part.
Even with the most recent changes, Ethereum’s situation is still not entirely dire. The switch from POW to POS consensus may ease the network’s computational load and improve performance. Because of the former, the network wouldn’t need to conduct as much computational labor to secure its assets. If enough users have contributed 32 ETH, the process would also add blocks at random to the network.