As a seasoned financial analyst with over a decade of experience in studying and analyzing cryptocurrency markets, I have witnessed many bull and bear cycles. The recent trend in Bitcoin miner revenue has piqued my interest, as it often provides valuable insights into the health of the network and its participants.
Bitcoin mining revenues, as indicated by on-chain data, are approaching their annual average. This could signal that the miner capitulation, or massive selling of bitcoins by miners due to financial strain, might be drawing to a close.
Bitcoin Miner Revenue Is Now Close To Its 365-Day SMA
As an analyst, I’ve recently explored the current state of Bitcoin miners in a new post on X. One effective method to evaluate their condition is by examining the network’s hashrate – a metric representing the total computational power dedicated to mining Bitcoin.
In this case, the analyst employs the daily earnings from these chain validators’ total revenue. Miner income consists of two components: block rewards and transaction fees.
In simpler terms, the initial reference pertains to the Bitcoins earned by miners as a reward for successfully adding new blocks to the Bitcoin network. Conversely, the second reference signifies the amount users pay as fees when they conduct individual transactions within the network. Historically, the block rewards have contributed much more significantly to miner income compared to transaction fees.
The below chart shows how the combined Bitcoin miner revenue has changed over the last few years.
The Bitcoin miner revenue chart shows an uptrend that began with the price surge initiated in October of the previous year. This trend reached a peak, setting a new record high (ATH), around April of this year.
Two primary causes accounted for this rise. Initially, the block reward, a BTC grant, remains constant in value and frequency. Consequently, fluctuations in the asset’s USD value are the sole determinants of any changes in revenue associated with it. Thus, an increase in price leads to heightened income.
As a crypto investor, I’ve noticed that with the surge of the bull market comes an influx of activity on the network. Consequently, the transaction fees have become dependent on the specific conditions of the blockchain. Given the limited space in each block, these fees naturally rise as more and more investors compete for transferring their cryptocurrencies.
The surge in revenue approaching all-time highs was significantly driven by the emergence of Runes, a groundbreaking technology on our blockchain that enables users to create fungible tokens. Transactions involving Runes function identically to other network transactions, thus influencing economics as well.
Based on the graph, the miner revenue experienced a significant decline following its all-time high (ATH), dropping beneath the 365-day simple moving average (SMA) mark.
The cause was the fourth Bitcoin Halving. Although block rewards typically maintain their value, there’s an exception: Halving events. These occurrences take place approximately every four years, reducing rewards by half during each instance, leading to significant fluctuations in miner income.
After experiencing a decline, the Bitcoin mining income has consistently fallen below the 365-day simple moving average (SMA). Consequently, numerous miners have been subjected to stress and some have been compelled to give up their operations.
“Despite a recent surge in revenue, miner earnings now stand at approximately $35 million. This figure isn’t much shy of the annual average of $40 million that we’ve seen. According to Van Straten, this signifies that the miner capitulation may be nearing its end.”
If the metric regains its 365-day simple moving average (SMA), the analyst believes that Bitcoin’s price may potentially rise further.
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2024-07-24 00:11