Miner data shows Bitcoin could have bottomed

Grabbing Bitcoin’s coveted bottom requires analysis beyond its price. One of the most reliable indicators of market troughs has historically been minor data. Often considered one of the most resilient players in the cryptocurrency ecosystem, the miner only surrenders when Bitcoin is too expensive to mine.

Hash Ribbon is a unique indicator used to determine whether the market is currently in a bearish or bullish stage. This indicator includes 30-day and 60-day Simple Moving Averages (SMA) of Bitcoin’s hash rate. The 30-day SMA falling below his 60-day SMA marks the beginning of a bear market and that the miners have begun to capitulate.

The data show that the market has been in minor surrender mode for almost 60 consecutive days. Minor capitulation deterioration ends when the 30-day SMA crosses his 60-day SMA. However, the difference in moving averages that do not move for days makes it difficult to tell when a trend reversal is likely to occur.

However, an analysis of miner balances shows that the worst has passed and miners are starting to recover. Miner balance looks at the total supply held at addresses belonging to a miner to determine if the miner is selling assets.According to data from glass nodeminor balances have recovered from their June lows to their highest since October 2017 (highlighted in red).

In addition to the recovery of balances, we have also observed miner outflows from exchanges temporarily outstripping inflows to exchange addresses (highlighted in black). This shows that more miners are withdrawing BTC from exchanges than depositing BTC to sell on the market.

The difficulty adjustment also indicates that Bitcoin may have hit a bottom. The difficulty adjustment, defined as the current estimated number of hashes required to mine a block, increased by 1.7% for the first time since June. The increase indicates that Bitcoin mining difficulty may have bottomed out in early August. If Bitcoin can continue to hold its price alongside the $23,000 resistance, we may not be revisiting these low mining difficulties any time soon.

Finally, another reliable indicator of market troughs also appears to be flashing red. The Puell Multiple is a metric used to determine mining potential by calculating the ratio of daily coin production (in US dollars) to the 365-day moving average of daily coin production. A low Puell Multiple indicates that miners are less profitable than the annual average. If the indicator is high, the profitability of miners is high, motivating them to liquidate the treasury.

The Puell Multiple marked the bottom of the previous cycle with great precision. It flashed bottom signals in November 2011, January 2015, November 2018, and May 2020. In June, it climbs slowly and steadily. And while the indicator has bounced in and out of the green zone in previous market cycles, the outlook remains positive.