As the bitcoin price climbs back above $7,300, the question on everyone’s mind is whether the most recent bottom is in, or whether another big drop is in the offing.
One analyst in the crypto community recently pointed out that BTC could still dump hard from here, despite the current bullish momentum. This, as he explains, would be as a result of miner capitulation that is happening right now.
Bitcoin Could See A Death Drop In Worst Case As Miners Capitulate
Miner capitulation happens in the bitcoin market when mining is no longer profitable. As the profits dry up, miners are forced to capitulate as they sell-off most of their bitcoin holdings in order to cover the costs. This is followed by increased selling pressure in the market and a drop in the network’s hash rate.
After the epic 50% drop in the BTC price in mid-March, the hash rate dropped from a high of over 130TH/s to around 80TH/s. The price has since recovered to $7,354.08 at the time of publication, and so has the hash rate.
Analyst Mansasuma, however, took to twitter to “crush some bullish dreams”. The analyst noted that the hash ribbons indicate that miner capitulation is happening right this second.
Further, he observed that although this is not an unusual scenario during a bull market, the current setup is not showing strong divergence, which could spur a death drop like the one witnessed in 2018.
This could mean that the current rally is a chance for bitcoin miners to offload some of their bitcoin at a profit before the halving event comes and cuts their rewards by half.
The Global Macro Environment Is Aligning The Stars For Bitcoin
Although miners are currently capitulating, the global macro picture paints a rosy picture for the future of cryptocurrency. Bitcoin has been moving in tandem with the US stock market amid the coronavirus pandemonium, but it is now showing signs of decoupling.
Moreover, the present global economic environment spotlights bitcoin’s property as an asset that’s immune to inflation and government control, as the amount of fiscal and monetary stimulus continues to increase. According to Brendan Blumer, the co-founder, and CEO of Block.one (the company behind EOS cryptocurrency), this is a recipe for a moonshot in the next 24 months.
Blumer also posited that a drop to the $3-$4k zone in the next four to six weeks is not entirely impossible. However, with the harsh new economic reality caused by the coronavirus outbreak, investors stuck with cash will be looking for the “least unattractive” asset to put their money into and crypto will most likely be it.
At the moment, the grim forecasts are overshadowed by the overwhelmingly bullish macro environment. With that in mind, crypto holders should brace themselves for the coming 24 months, as Blumer states.