The fourth Bitcoin halving event has significantly cut down miners’ rewards by 50%. However, the surge in the dApp activity on the Bitcoin blockchain has provided miners enough relief in terms of revenue contribution.
Bitcoin Miners See Boost In Revenue Streams
Ki Young Ju, CEO of CryptoQuant, highlighted a significant shift in miners’ income streams due to the development of applications on the Bitcoin network. According to Ju, transaction fees now contribute to over 7% of miners’ total revenue, a notable increase from 1% observed two years ago. This trend has persisted for the past four weeks and is anticipated to bolster the network’s fundamentals moving forward.
Building apps on #Bitcoin has significantly changed miners’ income streams.
Transaction fees now account for over 7% of their total revenue, up from 1% two years ago.
This trend has persisted for the last four weeks and could potentially strengthen the network’s fundamentals. pic.twitter.com/YVbdmLXB5c
— Ki Young Ju (@ki_young_ju) May 7, 2024
The increasing transaction fee revenue can be attributed to innovative token protocols such as Ordinals and Runes, which have enhanced Bitcoin’s utility. These advancements facilitate the creation of both non-fungible and fungible tokens on the network, consequently leading to a rise in transaction volume.
Bitcoin Miner revenue consists of fixed block subsidies and transaction fees paid by users. With programmed halving events, block rewards decrease. However, as transaction fees become a larger portion of revenue, they could potentially compensate for diminishing profit margins following each halving.
BTC Miners Feel The Heat
The day following the halving, transaction fees totaling over $80 million contributed to bolstering miner revenue. At the peak of runes activity, the average transaction fee on the network surged to $40, but it has since decreased to under $10 as Bitcoin network activity returns to normal.
However, with fees reverting to typical levels, total miner revenue from transaction costs has fallen below $5 million, placing pressure on miners. The 7-day moving average of Bitcoin miner revenue per terahashes per second (TH/s) has plummeted to $0.048, marking an all-time low.
On the other hand, Bitcoin mining companies continue to rejoice on Wall Street. Amid the current bounce back on Wall Street, stocks of Bitcoin mining companies have also rallied in recent times. On the other hand, top Bitcoin mining players like Marathon Digital have been making key changes to boost the mining activity and expand their market share.
The presented content may include the personal opinion of the author and is subject to market condition. Do your market research before investing in cryptocurrencies. The author or the publication does not hold any responsibility for your personal financial loss.
Bitcoin remains in the red with a 10% loss over the past week. The number one crypto by market cap has been consolidating at its current levels after a massive crash too it to a multi-year low of $17,500.
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At the time of writing, BTC’s price trades at $20,400 with sideways movement in the last 24 hours.
As many outlets have been reporting, Bitcoin miners have been reducing their BTC holdings. This has contributed to the selling pressure and to BTC’s price plunging to its current levels from the $30,000 area.
A recent report by analytics firm Coin Metrics looked into BTC miners’ addresses, and funds flow to pin down Bitcoin’s crash real impact on the sector. As the firm claims, the process of tracking down BTC miners’ addresses can be difficult, despite the transparency of the blockchain.
In order to get a clear picture of current miners’ BTC holdings, Coin Metrics labeled the addresses which have come in contact with mining pools. These miners combined their resources and split the rewards for including a block in the blockchain.
Miners pool their resources because they have a bigger chance of receiving the rewards. These pools interact with BTC addresses which Coin Metrics called 0 Hop miners and then the split rewards go to 1 Hop address or miners.
As seen below, the firm was able to discover that there are 2.9 million 1-hop miners, but this is the total number of addresses for every entity that has ever mined 1 BTC. The number has been on a decline since January 2021 when the sector became more industrialized.
In that sense, active Bitcoin miner addresses interacting with the mining pools total 34,000 in 2022. A much smaller number when compared to its all-time high, and with 2021 when these addresses stood at 92,000.
Bitcoin Miners Reduce Holdings, But Remain Bullish
The total number of 1-hop BTC addresses have been dumping their Bitcoin since July 2020. This metric inversely correlates with the price of BTC. While the cryptocurrency rose, the BTC supply held by these addresses trended to the downside.
These entities have sold at least 500,000 BTC from that period until June 2022 impacted by price volatility. As seen below, active miners have been reducing their supply as well but only sold around 25,000 BTC.
Coin Metrics analyst Parker Merritt added the following to the recent findings:
While most miners prefer HODLing, last week’s market turbulence threw many miners for a loop. With the wick down below $18K, several companies became forced sellers, liquidating their BTC treasuries to minimize the impacts of a margin call.
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There is an uptick on the chart above, which could translate into a new period of BTC accumulation from miners. Overall, less leverage in the crypto market could contribute to healthier price action.
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