Bitcoin

Bitcoin Miners Face Financial Strain

Bitcoin miners are starting to feel pinched as halved rewards become their new reality post-halving.

A spike in network fees briefly eased their strain. Yet, declining transaction fees are now increasing financial pressure.

Post-Halving Pressures Mount for Bitcoin Miners Amid Declining Fees

Kaiko Research recently reported a surge in daily average network fees after the halving. This surge helped Bitcoin miners offset some discomfort, albeit temporarily.

However, the initial user rush to the Runes protocol has cooled. According to Dune Analytics, Runes transactions plummeted by over 4,500%. They fell from 753,814 on April 24 to 16,630 by May 14.

Additionally, halving events often force miners to sell BTC to cover the costs of creating new blocks. Although the spike in fees helped mitigate some selling pressure, the recent fee decline could renew the pressures.

Read more: How Much Electricity Does Bitcoin Mining Use?

“For instance, Marathon Digital holds 17,631 BTC worth just over $1.1 billion, while Riot Platforms hold another 8,872 BTC worth over $500 million. If miners were forced to sell even a fraction of their holdings over the coming month, this would have a negative impact on markets,” the report reads.

Bitcoin Miners’ Reward Post-Halving 2024. Source: Kaiko Research

Furthermore, trading activity and liquidity typically decrease during the summer. Last August, the 2% market depth declined to as low as $250 million. This seasonal decline could further complicate the situation for miners and the broader crypto market.

Crypto analyst Maartun echoed Kaiko Research’s finding. He noted that Bitcoin miners’ profitability has plummeted to a 3-year low.

“Bitcoin miners are facing significant underpayment due to the recent halving of block subsidies and relatively low transaction fees. This is likely to cause substantial strain, especially for less efficient miners,” he wrote.

Despite the current situation, crypto analyst PlanB sees a brighter future for the long term. PlanB said that Bitcoin miners’ revenue will bounce back in 2 to 5 months as Bitcoin’s (BTC) price will double.

“[In] 2012: revenue drops [from] $3 million [to] $1.5 million, back in 2 months. [In] 2016: [revenue] drops [from] $60 million [to] $30 million, back in 4 months. [In] 2020: [revenue] drops [from] $500 million [to] $250 million, back in 5 months,” PlanB explained.

Read more: An Introduction to Free Bitcoin Mining

As Bitcoin miners weather the post-halving storm, their financial stamina faces a test. Fluctuating fees and market conditions pose challenges and opportunities. With a recovery in miner revenue forecasted, the coming months are pivotal for the sector’s stability and growth.

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