Hash Rate Plummets 8% as Miner Profits Squeezed
The Bitcoin network’s hash rate has fallen approximately 8% over the past week to 920 EH/s, a direct consequence of soaring energy prices stemming from the war in Iran. The conflict has added significant pressure to global energy markets, impacting the profitability of an industry where an estimated 8-10% of global mining is sensitive to energy costs. Bitcoin is currently trading below $72,000, reflecting a 5% decline from its high earlier in the week.
In response to the declining computational power, the network is poised for a downward difficulty adjustment of around 8%, which would be one of the largest negative shifts in the last five years. This adjustment highlights the severe financial strain on miners, whose margins are compressed by high operational costs and price volatility. This dynamic increases the risk of miner capitulation, where operators are forced to sell their Bitcoin holdings to cover expenses, creating further downward pressure on the market.
Negative Funding Rates Signal Bearish Conviction
Derivatives markets are reflecting a deeply bearish sentiment among traders. Bitcoin's perpetual futures funding rate dropped to -7% on March 18, indicating that short sellers are paying a premium to maintain their bearish positions. This level of conviction from bears suggests traders are anticipating further price drops, potentially retesting the $66,000 support level.
The pessimistic outlook is compounded by broader macroeconomic factors. Federal Reserve Chair Jerome Powell acknowledged that rising energy prices have contributed to a higher inflation forecast of 2.7%. Furthermore, rising yields on government bonds, with the 5-year U.S. Treasury reaching 3.80%, offer investors a less volatile alternative for returns, diminishing Bitcoin's appeal as a store of value in the current environment.
Institutional Buying Provides Critical Support
Despite the bearish indicators and miner stress, significant institutional demand is preventing a larger market correction. Consistent net inflows into spot Bitcoin ETFs and accumulation by large entities continue to absorb selling pressure. This steady buying acts as a crucial support level, keeping the price from collapsing under the weight of miner sales and negative derivatives sentiment.
The financial strain is evident in the stock performance of publicly traded mining companies. Riot Platforms (RIOT) has seen its stock decline nearly 10% over the past month, while Marathon Digital (MARA) has fallen 24% over the last year. This divergence—bearish miners and traders versus bullish institutional accumulators—has created a tense equilibrium, with sellers needing to exhaust their supply before a sustained upward trend can resume.
