Definition. The Miner Capitulation Risk tool is a two-part model which seeks confluence between implied miner income stress (Puell Multiple) and observed hashrate decline (Difficulty Ribbon Compression). It highlights periods where there is an elevated risk of capitulation in the mining industry, which may lead to the release of additional BTC volume from distressed miner balance sheets.

Technical. The model is constructed as follows:

• 🟠 The Puell Multiple (PM) tracks aggregate miner income in USD, relative to the 1-year average. Values below 1.0 indicate that miner incomes are lower than the yearly average, with values below 0.6 typically associated with periods of elevated financial stress.

• 🟣 The Difficulty Ribbon Compression (DRC) (purple columns) signals when hashrate is coming offline, causing protocol difficulty to fall in a statistically significant way. This is an explicit observation that mining rigs are being switched off due to income stress, and becoming unprofitable.

• 🟨 Elevated Miner Capitulation Risk zones (yellow columns) highlight periods where both metrics are signalling meaningful lows. A threshold of PM + DRC < 0.65 is selected as the definition of elevated miner capitulation risk.

Interpretation. Risk zones generally correlate with extreme bear market lows, where mining profitability is squeezed hardest and weaker operators are forced to sell treasury coins or shut down rigs. Historically these confluence periods have clustered around late-stage capitulation events; hashrate recovering while the zone deactivates has often accompanied the establishment of a market floor. As miner balance sheets are a comparatively small share of total supply, the signal is best read as a gauge of producer stress rather than a direct measure of sell pressure.

Notes. First presented by Glassnode in The Week On-chain Week 25, 2022. Built from the Puell Multiple and Difficulty Ribbon Compression. See also the Bitcoin Yardstick for a valuation view built on network security work.