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Much-Feared Bitcoin (BTC) Miner Capitulation Underway – Here’s Why Death Spiral Concerns Are Likely Overblown

Much-Feared Bitcoin (BTC) Miner Capitulation Underway – Here’s Why Death Spiral Concerns Are Likely Overblown

A significant portion of Bitcoin (BTC) miners are switching off their rigs in response to the halving. The process, known as capitulation, happens when miners can no longer make a profit by outpacing the electricity and maintenance costs required to power the network.
The crypto analytics firm Glassnode confirms that the halving, which implemented a 50% drop in mining rewards, also triggered a 50% drop in the amount of processing power dedicated to powering the network.
Fears of a mass capitulation of Bitcoin miners due to a sharp loss of revenue have long persisted. The scenario could, in theory, trigger a so-called “death spiral” that brings transaction speeds to a crawl, lowers confidence in the network and ultimately drags down the price of the leading cryptocurrency.
Fortunately, when there are fewer machines battling to earn BTC, the network automatically adjusts how much processing power is required to confirm transactions. According to Glassnode , the 6% difficulty adjustment that kicked in on Wednesday is already having an impact.

“[Bitcoin’s declining hash rate] is slowing and gradually reversing, as Bitcoin just experienced a downward difficulty adjustment, making mining slightly more accessible for smaller players again. 
The effect of the halving on miners is also being mitigated by an increase in fees, as miners prioritize transactions which offer higher fees in order to make up for the shortfall.”
Source: Glassnode/Twitter
However, miners aren’t out of the woods yet. They remain heavily reliant on Bitcoin’s price. The next difficulty adjustment, which will happen in about two weeks, will also be crucial.
“…even with more revenue coming in via fees, it will take a larger difficulty decrease – or more hopefully an increase in the price of BTC – to make Bitcoin mining profitable again for many of the smaller miners.”

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Disclaimer: Opinions expressed at The Daily Hodl are not investment advice. Investors should do their due diligence before making any high-risk investments in Bitcoin, cryptocurrency or digital assets. Please be advised that your transfers and trades are at your own risk, and any loses you may incur are your responsibility. The Daily Hodl does not recommend the buying or selling of any cryptocurrencies or digital assets, nor is The Daily Hodl an investment advisor. Please note that The Daily Hodl participates in affiliate marketing.
Featured Image: Shutterstock/Mark Agnor
The post Much-Feared Bitcoin (BTC) Miner Capitulation Underway – Here’s Why Death Spiral Concerns Are Likely Overblown appeared first on The Daily Hodl .

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