That was the conclusion of Blockchain infrastructure and cryptocurrency mining company Blockware after it released its latest Intelligence Newsletter on July 29.
Report: "Expect" the end of the capitulation by September
The latest edition of the market research series highlighted changes in the mining ecosystem that may reverse the trend that has been in place since early June.
Miners, judging by the hash ribbons metric, are retiring for a “prolonged period,” says Blockware, and as of August 1st, hash ribbons signal a 55-day capitulation. "The current miners' capitulation began on June 7, 2022 and lasted for a considerable time.
It is important to note that miner capitulations are particularly relevant because they reveal that a large number of machines are no longer hashing," the company wrote: "Since June 7, new generations of mining rigs have probably been connected to the systems of public and private mining companies.
However, enough old-generation rigs or inefficient, over-leveraged miners have shut down. Because of this, hash rates and mining difficulty have actually decreased”. The reversal reflects obstacles to profitability caused by the fall in the price of Bitcoin, which hit $17,600 in June – sending the market back into the late 2020s.
As signs emerge, albeit disputed, that the price is recovering, so the chances of better conditions for miners are improving. According to Blockware, the capitulation, as defined by hash ribbons, should be complete before the end of the summer.
"If there are no further drops in the price of Bitcoin, we should expect the miner capitulation to end in August or September at the latest," the Newsletter adds.
Mining weight will break a multi-month downtrend
When it comes to the return of miners, early signals are already visible on the chain, thanks to automated adjustments in the fundamentals of the Bitcoin network.
Specifically, the increase in mining difficulty followed three direct downward difficulty adjustments in a row. “Currently, the change in weight is forecast to be positive and there is a high probability that it will last,” Blockware summarized.
It will increase, if current spot price levels are also maintained, will be modest and will amount to around 0.5%. For comparison, the previous weight reduction was -5%.