Bitcoin miners might face this certain double whammy
- 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.
— glassnode alerts (@glassnodealerts) July 9, 2023
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.
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.
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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.