Bitcoin Mining is Back to Profitability, Hash Ribbon Shows Peak Capitulation May Have Finally Passed

Bitcoin’s (BTC) strong rebound throughout the past month has helped to dig miners out of the negative profit margins many were experiencing in the second half of 2022. Miners, who typically hold large amounts of BTC on their balance sheets, begun to capitulate during that time in an effort to keep the lights on. Not only were miners curtailing the computing power they provide to the network and selling off mining rigs, they were also selling off thousands of BTC to continue operations.

Finding the point of peak miner capitulation is a very common way investors will try to gauge a bottom in Bitcoin. One can attempt to identify miner capitulation, and a subsequent recovery in sentiment, with the use of on-chain analytics and metrics like the “hash ribbon”, which just recently flipped positive. If large miners are truly diminishing or fully halting their sales of BTC, a significant amount of downward pressure would come off of Bitcoin’s price and could help to sustain the ongoing rally.

Related ETF & Assets: Valkyrie Bitcoin Miners ETF (WGMI), Bitcoin (BTC-USD)

One of the most protracted bear markets in Bitcoin (BTC) history may be waning with the exchange rate per unit of BTC jumping back above $23,000 in USD terms this month for the first time since August. Perhaps the most critical developments to come out of a 50% rebound from 2022 lows near $15,600 has been large Bitcoin miners being able to return to profitability. Shares of publicly traded BTC miners have surged into the new year, fueling a near-doubling of the Valkyrie Bitcoin Miners ETF (WGMI) through the first three weeks of this year. Most miners remain heavily discounted from the sky-high valuations they were trading at in 2021, but a sustained recovery for these firms could be a key catalyst for boosting the price of Bitcoin higher in coming months.

Miners, who dedicate computing power to secure the Bitcoin network and generate blocks of transactions, which are then added to the blockchain, are also the network participants on the receiving end of newly-generated Bitcoin. A new block is solved every 10 minutes, on average, for a current block reward of 6.25 BTC (worth approximately $143,750). Therefore, throughout a single day, about 900 new BTC are generated and largely flow to mining pools (a joint group of cryptocurrency miners who combine their computational resources) or large corporate miners. It is still possible for a small solo miner to solve a block, as was the case last Friday with block number 772,793, but generally, a greater amount of computing power will correlate with winning a greater share of block rewards.

Therefore, large enterprise miners tend to earn a hefty load of BTC and hold a lot of it on their balance sheet. For example, data from BitcoinTreasuries.net shows Marathon Digital Holdings, Hut8 Mining Corp, and…