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Cathie Wood’s investment management firm Ark Invest released its monthly report analyzing various market dynamics surrounding Bitcoin on Tuesday.
It listed a few reasons Bitcoin’s price may have reached its cyclical bottom – one of which is that miners supposedly finished capitulating.
The Mining Bomb
Per the report’s words, Bitcoin’s hash rate “suggests that miners are no longer in capitulation mode.”
“Miner capitulation began in June 2022 and appears to be complete—a dynamic historically correlated with a high-conviction bullish environment,” it states.
Miner capitulation refers to when many miners are forced to turn off their machines, thus lowering Bitcoin’s hash rate. This often occurs when Bitcoin’s price experiences a substantial drawdown, thus draining miners’ profits in USD terms.
In June, for instance, many major Bitcoin miners were forced to sell over 50% of their Bitcoin. Last month, the Bitcoin mining firm North Compute filed for bankruptcy.
By contrast, if the hash rate begins returning to the network, it’s a sign that miners feel more confident about Bitcoin’s price going forwards.
The report provided an illustration of Bitcoin’s price plotted against its 30-day and 60-day hash rate moving averages. In gray are time periods where Bitcoin is either entering or exiting major compression. The last of these occurred between early June and late August when the hash rate reached new all-time highs.
Is the Bottom in?
Besides hash rate, on-chain indicators such as Bitcoin’s long-term holder supply are also looking bullish.
The metric represents the number of coins that have been held at the same address for 155 days or more. The figure is now at all-time highs, representing nearly 14,000,000 coins.
Meanwhile, Bitcoin’s quarterly coin days destroyed (CDD) has reached its lowest point since 2010 – a bullish sign. The metric is calculated by multiplying the volume transacted by the number of days each coin was held.
Some signals are still bearish, however – particularly in the macroeconomic department. Cathie Wood’s firm argued that U.S. monetary policy today is more restrictive than in the 1980s.
“Fed Chair Volcker tried to kill inflation by raising the Fed funds rate up two-fold from 10% to 20%,” the report said. “Chair Powell and the team have increased it 13-fold from 0.25% to 3.25%.”
The U.S. dollar index has also risen substantially this year, which has contributed to deflationary forces against commodities.