• Bitcoin miners are in distress and could capitulate soon going by on-chain data 
• Analysts are however still optimistic that the bear market may soon come to an end

Bitcoin (BTC) market recovery that has seen the benchmark cryptocurrency find some stability around $17,000 could face some sell-side pressure from Bitcoin miners going by on-chain data highlighted by crypto market analytics platform Glassnode.

Glassnode, in a tweet, shared that the Bitcoin protocol has just recorded a 7.3 percent drop in mining difficulty—a metric that is a measure of how difficult it is to mine a Bitcoin block, or in more technical terms, to find a hash below a given target.

The mining difficulty drop is the largest since July 2021 and is in response to the falling Bitcoin hashrate—which is the total amount of computing power dedicated to securing the Bitcoin network—Glassnode notes.

Glassnode adds that the drop in the hashrate of Bitcoin is because miners are under “extreme stress” given the current market conditions of depressed coin prices, rising energy costs, and debt burdens.

Meanwhile, the performance of the two metrics has also resulted in an inversion of the Bitcoin Hash-ribbon technical indicator. The 30-day moving average (30DMA) of the metric has fallen below the 60DMA for the first time since June this year, indicating a possible capitulation by the distressed miners.

The BTC bottom could still possibly be in

Despite the threat of miner capitulation, Glassnode analysts are still of the opinion that the Bitcoin price bottom may be in. According to Glassnode’s Week on Chain report, a number of metrics that track the pace of selling and on-chain behavior are beginning to show a reduction in factors that trigger sharp sell-offs.

One such metric is the realized cap which is suggesting that excess liquidity, including bad debt and over-leveraged entities, is drained from the market as it is currently 2.6 percent higher than the May 2021 peak, indicating that the BTC market is getting more mature.

“The 2010-11 realized cap saw a net capital outflow equivalent to 24 percent of the peak. The 2014-15 realized cap experienced the lowest, yet non-trivial capital outflow of 14 percent. 2017-2018 recorded a 16.5 percent decline in the realized cap, the closest to the current cycle of 17.0 percent” the analyst said.

The analysis asserts that the Bitcoin price bottom may be in as investors are moving away from bearish extremes. Regardless, it concedes that several potential downside catalysts remain.

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