Each Bitcoin bull market started with miner capitulation, says researcher

Each Bitcoin bull market started with miner capitulation, says researcher

Mining difficulty could be an indicator for predicting BTC prices. All three of the major bull runs in Bitcoin’s history started after mining difficulty reached its bottom, meaning the market could see robust gains this year, says crypto researcher PlanB.

Predicting Bitcoin bull runs with mining difficulty

Despite being known for its incredibly high volatility, the crypto market moves in cycles. Crypto analysts use a variety of different tools and factors to predict how long with each cycle last and how much different factors will sway the market.

Moving averages are a favorite among analysts, as they’re able to offer a fairly accurate prediction of major price spikes. However, crypto researcher PlanB found a different, possibly more accurate way to predict Bitcoin’s price movement.

In a Twitter thread, the researcher explained how the past three major Bitcoin bull runs started when mining difficulty reached its bottom.

He explained that Bitcoin’s price dropped significantly each time mining difficulty reached an all-time-high, and continued to drop until a large percentage of miners became unprofitable. When Bitcoin’s price increases, and competition intensifies, many miners cannot keep their hardware going, forcing them to capitulate.

Profitable mining supposedly pushes Bitcoin’s price up

As miners leaving the network the network hashrate decreases. A decline in hashrate is followed by an adjustment in mining difficulty shortly afterward.

Over the past 10 years, each time Bitcoin mining difficulty reached its bottom a major bull run followed. The graph shared on Twitter showed the bottom was reached at the beginning of 2012, the second quarter of 2015, and the end of 2019.

Graph showing miner capitulation in 2012, 2015, and 2019

The graph also showed that the drops in difficulty happened every 3-4 years, or at around 20,000 blocks since the last time a bottom in mining difficulty was reached.

While there’s no guarantee that this market cycle will follow the previous two, if it does, it could mean Bitcoin may reach new heights. Based on the lower high trend shown in the graph, Bitcoin’s next ATH could be 1000-2000 percent higher than its price during the lowest mining difficulty in this cycle.

As Bitcoin’s price hovered around $3,500 at the end of last year, when the mining difficulty reached 100 percent, it would mean its value could reach between $35,000 and $75,000 in the next couple of years.

After a Twitter user pointed this out, PlanB said that it was a rather conservative estimate. The last two times Bitcoin reached its all-time-high after miner capitulation its price increased around 100 times, he explained.

That said, PlanB’s analysis could be totally erroneous. Several experts in the mining industry told CryptoSlate that mining difficulty is a trailing, not leading indicator of Bitcoin prices. As BTC prices increase or decrease mining difficulty adjusts accordingly—not the other way around. Thus, the two are closely correlated, but PlanB’s reasoning for the direction of cause and effect could be questionable.

Bitcoin | BTC

Updated: Aug 24 at 2:54 pm PDT
$10,084.63
-3.07%

Bitcoin, currently ranked #1 by market cap, is down 3.07% over the past 24 hours. BTC has a market cap of $180.46B with a 24 hour volume of $15.04B.

Chart by CryptoCompare

Bitcoin is down 3.07% over the past 24 hours.

Filed Under: Bitcoin, Mining, Price Analysis, Price Watch
Priyeshu Garg

Priyeshu is a software engineer who is passionate about machine learning and blockchain technology. He holds an engineering degree in computer science engineering and is a passionate economist. He built his first digital marketing startup when he was a teenager, and worked with multiple Fortune 500 companies along with smaller firms. When he is not solving transportation problems at his company (Ola), he can be found writing about the blockchain or roller skating with his friends.

View author profile

Commitment to Transparency: The author of this article is invested and/or has an interest in one or more assets discussed in this post. CryptoSlate does not endorse any project or asset that may be mentioned or linked to in this article. Please take that into consideration when evaluating the content within this article.

Disclaimer: Our writers' opinions are solely their own and do not reflect the opinion of CryptoSlate. None of the information you read on CryptoSlate should be taken as investment advice, nor does CryptoSlate endorse any project that may be mentioned or linked to in this article. Buying and trading cryptocurrencies should be considered a high-risk activity. Please do your own due diligence before taking any action related to content within this article. Finally, CryptoSlate takes no responsibility should you lose money trading cryptocurrencies.