Bitcoin's $90k Defense: Miners Hold On Despite Volatility

Bitcoin's recent price volatility has raised concerns about the sustainability of mining operations, with some analysts warning of potential miner capitulation. However, James Van Straten, a cryptocurrency analyst, believes that Bitcoin could hold onto the $90,000 level and prevent miners from going underwater.

The Hash Ribbon, a key indicator that tracks miner profitability and potential exits from the market, has been flagged, hinting at BTC miner distress and a likely bottom signal for Bitcoin, according to historical data. Van Straten noted that the Hash Ribbon signaling miner capitulation usually marks a bottom, typically lasting around 30 days. The last occurrence was in October 2024.

In most cases, the Hash Ribbon indicator has also acted as a buying opportunity, coinciding with Bitcoin's bottoms. However, the question remains whether the trend will repeat itself this time.

Van Straten added that despite the expected 4% hike in Bitcoin's network difficulty on 9 February, the king coin might still defend the $90k-$105k price range. He expressed confidence that $90k is the bottom of this range, despite the anticipated increase in difficulty putting more stress on miners.

Network difficulty refers to how hard it is for miners to find a block (mine BTC). A 4% hike means miners have to use more computational resources to mine the cryptocurrency, putting upward pressure on average mining costs. As of 6 February, the average BTC mining costs were $86.5k. If Bitcoin's price drops below the average mining costs, then the average miner will be underwater and under more pressure.

Historically, Bitcoin's price has always stayed above the average mining costs. Therefore, despite the expected increase in difficulty and more pressure on miners' capitulation, a drop below average production costs could be a buying opportunity if Bitcoin climbs higher later.