Bitcoin

Bitcoin miners might face this certain double whammy

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.

Published

1 year ago

on

  •  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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