On the 12th of this week , after the United States announced that the CPI cooled down and interest rates remained unchanged in May, the three major U.S. stock indexes hit new highs, but the cryptocurrency market fell into a downturn. After briefly rising to $70,000 and $3,657 respectively on the 12th, Bitcoin and Ethereum have now fallen back to levels of $67,000 and $3,500.
This makes the community wonder why the performance of the two capital markets is so different? What went wrong?
QCP Capital: Bitcoin miner capitulation limits BTC gains
In this regard, digital asset trading company QCP Capital stated that they believe this is due to the fact that Bitcoin miners are experiencing "capitulation" after the halving, which directly limits the price increase.
Bitcoin miners mainly rely on two sources of income: mining rewards and transaction fees, which must exceed the cost of mining to be profitable. Therefore, miners need to consider the following points to avoid quitting the mining industry:
- Fee income rises
- Bitcoin price rises
- Mining costs reduced
Bitcoin’s fourth halving, completed last month, halved the block reward for miners from 6.25 BTC to 3.125 BTC. Although the Bitcoin Runes protocol once allowed miners to earn generous handling fees, as the protocol quickly faded, the handling fee income plummeted, resulting in an increasing number of unprofitable miners who had to quit and surrender. QCP Capital believes that this situation has limited the rise in Bitcoin prices.
As for how long this will affect the price of Bitcoin? Some analysts believe that as unprofitable miners quit mining and the cost of Bitcoin mining drops, miners who are still operating may not be eager to sell their Bitcoins in exchange for operating funds. This is to some extent The extent will reduce the selling pressure in the market in the future, and the room for Bitcoin’s decline in the short term seems to be limited.
QCP Capital said the crypto market is set for a quiet summer with lower trading volumes and the absence of any obvious catalysts to move the market.
Kaiko warns: A sharp drop in fee income may lead to a wave of selling by mining companies
In mid-May, cryptocurrency research company Kaiko also stated in its weekly report that during the summer months, trading activity usually slows down and liquidity dries up.
Additionally, the agency noted that Bitcoin miners typically treat their Bitcoin holdings as current assets on their balance sheets so that they can sell them to pay for operating expenses. The report warned that as miners’ fee income declines, miners’ selling pressure will increase:
If these mining companies holding large amounts of Bitcoin are forced to sell even a small portion of their assets, it will have a negative impact on the market.
According to data from Kaiko, the total value of Bitcoin held by the two largest listed mining companies in the United States exceeds $1.6 billion. Marathon Digital holds 17,631 BTC, worth just over $1.1 billion, while Riot Platforms holds 8,872 BTC, worth over $500 million.
Another encryption research institution, 10x Research, also warned about the trend of Bitcoin after the halving in a report in April. Its analysts predicted that miners may liquidate $5 billion worth of BTC after the halving, and this sell-off may continue for 4 to 6 months, causing Bitcoin to trade sideways in the coming months.
