Why Kaspa Miner Capitulation May Signal a Bottom for KAS Price

The Kaspa price pumped 8% today and broke past $0.080 during a broader crypto market recovery that was fueled mainly by big news dropped by Ripple's CEO

The Kaspa price today pumped 8% and broke past $0.080 during a broader crypto market recovery that was fueled mainly by big news dropped by Ripple’s CEO—claiming that the SEC finally dropped the XRP lawsuit.

However, the Kaspa community could be interested in a thread posted by X (Twitter) user ‘Kaspa Report’ who has been following KAS in detail in recent weeks.

Miner Capitulation Phase Explained

The post covered the topic of miner capitulation, explaining that the network is currently experiencing this phase as the fee revenue paid to Kaspa miners has fallen to the lowest level in six months.

Miners are currently facing a triple challenge—the price has dropped over 60% from its all-time high, daily fees have plunged over 99.9% since their peak, and block rewards have fallen by roughly 33% since mid-2024. This combination of factors has left many miners frustrated and unprofitable.

As a result, the network is experiencing widespread miner capitulation.

This is signaled by the decline in hashrate, which has seen a roughly 25% decline since reaching its all-time high of 1.59 EH/s several months ago and is likely to decline further as mining remains largely unprofitable for most miners at the current price.

Despite this seemingly negative trend, there’s a silver lining: widespread miner capitulation is generally considered a reliable market bottom signal in cryptocurrency markets.

How Miner Capitulation Affects Supply and Demand

When emissions decline and fees decrease, miners’ income drops sharply, causing many to stop. While this might appear to threaten network security, it simultaneously reduces the supply of Kaspa that miners sell, increasing marketplace scarcity.

During the KRC-20 minting and trading frenzy in October 2024, miners earned 24,500,000 KAS in fees, flooding the market. Now, they’re receiving just 5,660 KAS in fees daily, representing over a 99.9% decline from the peak.

Additionally, in mid-2024, miners were receiving about 8.6 million KAS in coinbase rewards per day, whereas today they’re receiving less than 5.5 million KAS daily, a decline of more than one-third.

This substantial reduction means miners are bringing much less KAS to the market, thereby decreasing supply. Although miners don’t usually sell all their KAS, this reduction showcases the massive impact that declining fees and emissions can have on sell-side flows.

The more constrained marketplace supply becomes, the higher the likelihood of a supply shock and corresponding short squeeze, especially since Wallet #2 is accumulating KAS nearly as quickly as new supply enters the market.

Miner capitulation can ironically boost demand as well. Miners who mine KAS for long-term accumulation may stop mining to buy it on the open market for less than the mining cost, converting themselves from suppliers to buyers.

Additionally, miners who don’t capitulate gain pricing power as fewer miners supply the market.

With decreasing supply and potentially increasing demand, prices usually begin to rise, which is why miner capitulation often signals a cyclical market bottom. It indicates that the positive feedback loops that decrease price are beginning to reverse, and the same feedback mechanisms will soon begin driving price higher.

This dynamic reveals that Kaspa functions somewhat like an “energy stablecoin.” When the cost of energy needed to mine KAS exceeds its market price, miners stop, reducing the network’s hashrate and energy use. Some former miners then accumulate by buying KAS on the open market, increasing demand and raising its price. Through this rational economic behavior, miners help maintain an equilibrium between Kaspa’s market price and its production costs.

Both operating expenses (including energy costs) and capital expenditures reflect energy costs in mining. Miners who can’t profit will stop mining. This drives down the total hashrate. With fewer miners competing, those who remain have a better chance of earning rewards. Eventually, the cost to mine Kaspa will match what people are willing to pay for it in the market. This natural balance explains why, over time, we often see both hashrate and price moving in similar patterns for cryptocurrencies like Kaspa and Bitcoin that have limited supply.

Although factors like price manipulation can temporarily disrupt this equilibrium, the efficient market will eventually prevail, and Kaspa’s price will tend to revert to its mining cost. Price manipulators effectively receive a subsidy from miners by accumulating Kaspa at low prices, which ultimately causes miners to stop operating until price and hashrate equilibrate again.

While it’s difficult to predict exactly when miner capitulation will end and when the supply shock will hit, both will eventually happen according to market dynamics. When they do, prices typically rise significantly, attracting new miners and restarting the cycle.

The above is the detailed content of Why Kaspa Miner Capitulation May Signal a Bottom for KAS Price. For more information, please follow other related articles on the PHP Chinese website!