Dread it. Run from it. Bitcoin (BTC) miner capitulation arrives all the same. As , a cryptocurrency analyst, the Hash Ribbons — an indicator tracking the health of the Bitcoin network’s hash rate — has finally seen a bearish crossover, or “inversion,” after days and weeks of anticipation. This could have a strong effect on the cryptocurrency market if history rhymes, potentially depressing prices for the next few weeks, maybe even months.

It's official. We are now in a Bitcoin Miner Capitulation. The only question now is: How deep we go? — Charles Edwards (@caprioleio)

What’s Bitcoin Miner Capitulation?

Before we get into the potential impacts of Bitcoin miner capitulation, what is it? Long story short, miner capitulation is when smaller, non-industrial mining operations “get backed into a corner” when the price of Bitcoin falls and their mining machines become technologically obsolete. //twitter.com/ColeGarnerBTC/status/93635840 This forces these miners to sell the BTC they earned via mining, often all at once, to keep the lights on, cash out, or to upgrade their systems for the future. This may sound relatively innocuous — of course, miners need to sell Bitcoin to fund their operational expenses — though analyst Cole Garner notes that this becomes a vicious cycle:

“Undercapitalized miners panic sell, price dumps, longs get squeezed, stop losses cascade — then more miners lose their lunch.”

The capitulation is signaled by a bearish crossover of the Hash Ribbons, as the inversion shows that miners have stopped allocating resources to expand their operations, and have begun to actually pull their machines from active operations.

What Will Happen to BTC?

Historical precedent suggests that due to the impending capitulation of miners, pain for the cryptocurrency market is near. As reported by NewsBTC, the Hash Ribbons inverted literal days before Bitcoin began its 50% decline from $6,000 to $3,000. And that’s not all.

Below is a chart from Cole Garner. What it shows is that the inversion of the Hash Ribbons in 2016 resulted in a 30% drop a few days after the signal flashed, then a few weeks and months of consolidation prior to an eventual breakout.

It is important to note, however, that a 30% drop might not be had with this miner capitulation. Edwards pointed out that in 2012, BTC saw two small Hash Ribbon inversions during a macro bull trend, resulting in “mini” capitulation events that led to extremely brief drops of 10%, maybe 20%.

Yes this is very possible – a "mini" capitulation. We saw something similar in 2012 and 2016. 2012 is probably the most relevant to today, because it was ~6 months prior to the halving. — Charles Edwards (@caprioleio)

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