Amid the global stock market slide and the mounting concerns about a possible U.S. economic slowdown, the Bitcoin market is interesting to observe. This new type of asset, often praised for its portfolio diversification potential, is generally uncorrelated with traditional markets, sometimes reacting to broader macroeconomic events, and other times following its own logic.

Last Tuesday’s stock market slump was mirrored by the BTC price, but with a bigger amplitude. While the S&P500 dropped 3.7%, Nasdaq100 5%, BTC plunged 12%. Since then, all have recovered about half of their losses.

Bitcoin’s sharper decline could be attributed to its lower market depth and liquidity, or else by its relative immaturity compared to the stock market. However, there may also be factors related to the Bitcoin blockchain and its use, which has been rather sluggish lately.

Institutional investors are showing signs of unease too, with outflows from Bitcoin spot ETFs reaching $643 million last week and matching the largest recorded outflow set in March this year (data: Coinshares).

Is it a temporary slowdown to address the overall macro fears, or does this situation signal a deeper trend? Bitcoin miners seem to have an answer to this, as their industry gets ever more competitive despite the languishing revenues.

Bitcoin activity cooling off

The recent Coinglass report sheds light on some of the most important characteristics reflecting the state of Bitcoin – the transfer activity. For Bitcoin to fulfill its ambition as an alternative currency, it must not only serve as a reliable store of value (quality ensured by its scarcity and independence), but also a practical means of exchange. In other words, BTC price increase must be accompanied by increased real-world adoption, i.e. people using bitcoin as money.

The Glassnode chart shows that after a strong spring, bitcoin settlement volume is beginning to fall towards its yearly average. The network is currently processing and settling around $6.2 billion worth of transactions per day, marking a cooling off from the previously recorded high of $10 billion.

Trading appetites are decreasing too, with monthly average exchange volume falling well below the yearly and marking a weak momentum. Another useful metric to assess Bitcoin activity is network value to transactions (NVT), and its signaling indicator called “NVT Golden Cross.” This metric compares short- and long-term trends in NVT and predicts local tops and bottoms (values over ‘2.2’ : short signal, values under ‘-1.6’ : long signal).

CryptoQuant analyst Burak Kesmeci reads the current NVT golden cross chart in a rather pessimistic way: “The NVT Golden Cross metric is struggling to surpass its previous peak and is unable to do so. Subsequently, Bitcoin price has been declining. All of this indicates that the current uptrend is losing momentum.”
 
However, we can also note that while the indicator is showing higher lows, Bitcoin price is making lower lows. Such a divergence could indicate a possible bullish signal, suggesting that underlying network activity is strengthening.
 
Miners push on
Miners are crucial to the Bitcoin blockchain, providing the hashing power to add new blocks and process transactions. However, mining is a challenging industry, as miners can't control either the energy costs or the value of bitcoin, in which they earn rewards. Despite volatile market conditions, miners have continued to install new ASIC hardware, pushing the overall hash rate to 666.4 EH/s, just 1% below the record. As the hash rate rises, so does the mining difficulty, which keeps the block production time steady at around 10 minutes. This situation highlights the growing competitiveness of mining and the stubbornness of the miners who continue to push even as their income remains 22% below the all-time high (data: Glassnode).
 
Miners’ perseverance stems from their deep-seated faith in the future of Bitcoin. In fact, most miners have prepared beforehand to withstand the post-halving period and the lower revenues it entails. Nine out of 13 US-listed Bitcoin mining companies raised capital through stock offers in the second quarter of 2024: Bitdeer, Bitfarms, Cipher, CleanSpark, Core, HIVE, Marathon, Riot, and Terawulf. This capital inflow could help them accumulate bitcoin without necessarily selling it immediately.
 
Indeed, miners used to sell most of their coins to cover their capital-expensive operations. However, recently they've been retaining more in treasury reserves, signaling long-term confidence in Bitcoin. For now, bitcoin miners continue to absorb the revenue decline, waiting for the next growth cycle.