Bitcoin: The woes of BTC miners continue as prices crash

• As BTC’s price crashed, it caused a big dent in miners’ total earnings.
• Miner reserve increased substantially indicating a hoarding mentality.

Bitcoin [BTC] miners’ predicament was set to continue as revenue earned through creating new blocks on the chain sank to new depths.

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As per an update shared by on-chain analytics firm Glassnode dated 19 August, the total transaction fees paid to miners fell to a new 5-month low of $21,256. This drop was worse than the previous 5-month low, recorded more than a month ago.

Miners’ woes continue

The fall in fee revenue came even as Bitcoin recorded its steepest drop of 2023 over the last week. After wiggling in a tight trading range for more than a month. the king coin broke steeply to the downside with weekly losses of 11% at press time, data from CoinMarketCap

It is a known fact that miners rely on fiat currency to finance their ever-increasing hardware and other infrastructure costs. Hence, they convert their BTC holdings into cash frequently.

However, as prices crashed, it caused a big dent in miners’ total earnings, as reflected in the graph below.

Source: Glassnode

Notice how the drop in revenue came abruptly following a sustained period of increase. This possibly threw their liquidation plans into disarray.

As per CryptoQuant, the amount of BTC held by miners increased substantially over the past week, forming a negative correlation with the price. As a result, miners developed a hoarding mindset and waited for prices to rebound slightly before dumping their stashes.

Source: CryptoQuant

Hash rate continues to rise in the long-term

Despite the ebbs and flows of the mining sector, it was pertinent to note that the overall hash rate for Bitcoin has only trended upwards over the years. A higher hash rate is imperative for the overall security and decentralization of the blockchain. It helps in preventing malicious players from launching assaults like the 51% attack.

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However, a rising hash rate demands installation of sophisticated and expensive mining equipment. With the decline in revenue as highlighted earlier, less-efficient miners might be eventually forced to shut down their rigs.