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Bitcoin miners might face this certain double whammy

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After making a killing during the BRC-20 minting frenzy in early May, most miners were grappling with reduced earnings at the time of writing.
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Bitcoin miners face double whammy of reduced revenue, increased hardware costs
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  •  The portion of miner revenue derived from transaction fees plunged to a 4-month low.
  • Bitcoin network’s hashrate hit an all-time high, requiring more investment in mining equipment.

The fortune of Bitcoin [BTC] miners has taken a drastic turn in a very short span. After making a killing during the BRC-20 minting frenzy in early May, most miners were grappling with reduced earnings at the time of writing.

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According to Glassnode, the portion of miner revenue derived from transaction fees plunged. It touched a 4-month low as of 9 July.

Transactions fall on Bitcoin network

Miners need to be incentivized to validate transactions and secure the Bitcoin network. The incentives come in two forms: block rewards and transaction fees. While the first is getting less lucrative as the rewards progressively reduce every four years, miners look towards fees paid by users to cover their expenditures.

However, transaction count on the network has steadily climbed down from its all-time highs in May. The protracted low volatility phase and investors’ increased willingness to HODL tokens have proven to be a dampener for miners’ spirits.

Exchange supply fell to multi-year lows, suggesting that there was less BTC to be sold and bought, and hence fewer transactions to benefit from for miners.

Source: Santiment

Hashrate pain increases

However, transaction count surged dramatically over the weekend. As a result, Bitcoin network’s hashrate hit an all-time high, as per a report by Bitcoin mining research company Hashrate Index. Growing hashrate presents a new set of challenges for miners. They must expand their mining infrastructure and purchase specialized hardware.

But the report highlighted that prices of premium Application-Specific Integrated Circuits (ASIC) equipment have increased sharply, causing more pain for miners.

Source: Hashrate Index

Read Bitcoin’s [BTC] Price Prediction 2023-24

Meanwhile, the hashprice trended downwards over the past week. An indicator of mining profitability, hash price is positively correlated to BTC’s price movements. After a rally in June, BTC has stayed sluggish since the start of July, as per CoinMarketCap, causing more discomfort to miners.

Source: Hashrate Index

 

 

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Saman Waris works as a News Editor at AMBCrypto. She has always been fascinated by how the tides of finance and technology shape communities across demographics. Cryptocurrencies are of particular interest to Saman, with much of her writing centered around understanding how ideas like Momentum and Greater Fool theories apply to altcoins, specifically, memecoins. A graduate in history, Saman worked the sports beat before diving into crypto. Prior to joining AMBCrypto 2 years ago, Saman was a News Editor at Sportskeeda. This was preceded by her stint as Editor-in-Chief at EssentiallySports.
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