The final capitulation event for Bitcoin. When is it coming!? What is going to cause it?
How long until we hit the bitcoin bottom? Well to figure the answer to those questions,
you gotta go back to the roots of how Bitcoin works. With the Bitcoin miners.
They haven’t fully capitulated & every cycle they do. So are you ready to figure it all out
like Summer Sanders!? Well you don’t really have a choice, because it’s time for Chico Crypto!!
Yes, if you didn’t know…the Bitcoin miners are what make the wheels go around
with the Bitcoin blockchain. They provide computing power which secures the network,
fighting with one another to be the one to provide the power
which seals the Bitcoin block, of which they are rewarded Bitcoins for…
The miners play a more than important role,
and they are the final straw when it comes to a Bitcoin bear market.
When the miners capitulate, in the past, has meant we are near the Bitcoin bottom.
How can you view miner capitulation!? Well 2 ways, through hashrate and mining difficulty.
Hashrate is how much power is in the Bitcoin network, and difficulty is how difficult it
is to mine a Bitcoin which takes into account hashrate and the number of mining participants.
As we can see in the last cycle the hashrate topped out at the end of October 2018….with the
hashrate bottom coming just over a month later…it came by December 9th 2018. A similar story can be
seen with Miner difficulty, it topped out in October too, and saw its bottom in December.
What else coincided with this December 2018 bottom in hashrate and diffuculty!?
Well the Bitcoin price did. As we can see in November of 2018
the Bitcoin price crashed from the 6k levels, down to a bottom of around 3k by December 13th.
So the next question, is something similar happening this time around!? Well
it’s beginning. Taking a look at the hashrate today, we can see difficulty
topped out at over 250 exo hashes per second on June 8th, and since has been crumbling…as
of today, the hashrate stands at just over 180 exo hashes per second.
Looking at the difficulty, it peaked around the same time, and since has been slowly falling off…
And of course the Bitcoin price lately has been
falling and falling. Coinciding with miners starting to capitulate.
Miner capitulation is beginning, we just haven’t seen the worst of it yet…
Remember the total hash rate today has fallen from 250 exohashes
to about 180 exohashes per second. That is a hashrate reduction of 28 percent.
Looking back to 2018, it went from basically 60 exohashes
down to about 33 exoshashes. That was a hashrate reduction of 45 percent.
Also difficulty, today it has fallen from 31.5 T,
down to about 29 T which is about an 8 percent decrease in difficulty. Looking back to 2018…it
went from 7.5T at the peak, down to about 5T…which is a difficulty adjustment of about 33 percent…
So obviously the hashrate needs to reduce
some more and we need to see bigger difficulty adjustments. Is that happening!?
Well popular Bitcoin on chain analyst Will Clemente, had something to say about the
hashrate just a few days ago. He posted a chart of the collapsing hashrate and said
“Hash rate clearly rolling over, indicating more machines being unplugged. By the end of this bear
market, only the strong miners will survive. As far as what this means for the Bitcoin protocol
itself, next difficulty adjustment comes in about a week and business as usual.”
Hashrate is clearly rolling over, and the next difficulty adjustment comes in about a week.
So what’s going to happen with this adjustment?
Well we are going lower. Joe Burnett tweeted this just a few days ago too “Bitcoin difficulty
reached an all time high on May 12th, 2022. 62 days later and it has yet to bottom. The
next adjustment is projected to be -1.2%. The 2018 miner capitulation in difficulty lasted 87 days.”
Hashrate and difficulty will continue going down, which isn’t a bad sign…it’s a good sign,
meaning we are getting very close to the end of this bear market. The Bitcoin bottom.
Although around the same time of my estimated Bitcoin bottom,
which I’ve been saying comes in late August or early September of this year,
there will be an even bigger miner capitulation that has nothing to do with Bitcoin…and everything
to do with Ethereum…because a bomb is about to go off withing the Ethereum blockchain,
forcing a miner capiulation. This is called the Ethereum difficulty bomb.
The difficulty bomb will be a network upgrade and measure to disincentivize Ether mining
operations from keeping their physical mining devices running as the network
transitions from proof-of-work (PoW) to proof-of-stake (PoS).
It dramatically increases the difficulty for miners to verify transactions on the network,
thus reducing profitability for the proof of work miners.
Eventually, it will become impossible for physical miners to validate a block.
So when is the difficulty bomb slated to go off?? Well it was actually supposed to go off
last month, but of course there was a delay, it wouldn’t be Ethereum if there weren’t delays.
But Ethereum core developer Tim Bieko tweeted last month about when it is now scheduled
to happen. He said “In short, we agreed to the bomb delay. We were already over time,
and want to be sure that we sanity check all the numbers before selecting an exact
delay and deployment time, but we are aiming for a ~2 month delay”
So based on about a 2 month delay, that would put the difficulty bomb
going off sometime in August or September.
That means around this time, there are going to be some very contentious things happening with
Ethereum. Where will the hashrate go? Will the miners try and hardfork ETH??
Well looking at the Ethereum hashrate over the past year,
Miners are starting to fall out already. The hashrate is collapsing,
and collapsing harder than Bitcoin’s as miners prepare to find new homes.
Well there is great website called whattomine.com,
which details the most profitable proof of work chains. Here we can see what blockchains,
could become the new homes of all that hashpower on Ethereum. As we can see,
BEAM is actually more profitable to mine than Ethereum right now…after Ethereum there is Firo,
Ravencoin, Neoxa, Ethereum Classic, and Sero…which all could use Ethereum’s GPU hashrate power.
So as the difficulty bomb gets closer and closer,
I would expect a few of these blockchains to start pumping, as they start gurgling up the hashrate.
Although there could be a miner last stand…Ethereum
miners could band together & hardfork ETH, continuing the proof of work blockchain.
So if you didn’t know, there was another major upgrade that happened early in 2021.
This was EIP 1559, which implemented the burn upgrade, reducing ethereum miner rewards.
This was contentious, and actually one of Ethereum’s largest pool operators,
announced that they were against EIP 1559,
and would get community support to hardfork, if it was implemented.
Their campaign against EIP 1559 was so successful they even got a website up,
which showed the pools who opposed EIP 1559 and joined flexpool, and those who supported it,
EIP 1559. With the pools that joined in stopping the EIP, like Sparkpool, Ethermine,
Nanopool and more…they were getting actually close to having 50 percent of
the hashrate against the EIP. Which would have led to a very contentious hardfork…
Luckily the fight fizzled out and no hardfork happened back then. But let me tell you,
they will speak up again…mining is their business, and with no mining of Ethereum…another
fight is going to begin soon. Cheers viewers I’ll see you next time!