Bitcoin Miners Grapple with Increased Costs and Lower Rewards, Not a Total Sell-off: Analyst
Summary:
Despite rising operational costs and lower rewards pressuring Bitcoin miners, the situation isn't catastrophic, according to cryptocurrency analyst James Check. Currently in a phase of hash ribbon inversion with slower block discovery, about 5% of mining hashrate is struggling. Check also notes that while Bitcoin miners might be offloading some possessions, it's not a total sell-off. The current Bitcoin network hash rate stands at 586 exahash per second, down 2% over the past month. As revenues increasingly rely on transaction fees, miners need to innovate and manage capital more efficiently.
The escalating operational expenses and diminishing rewards are exerting pressure on Bitcoin (BTC) miners, however, the effect isn't disastrous, says a cryptocurrency specialist. The current situation indicates a phase of hash ribbon inversion, with slower than normal block discovery due to decreased online hash rate, explains James Check, Glassnode's principal analyst in a June 21 X video. Check provides that nearly 5% of mining hashrate, which refers to the computational power devoted to the network via mining, is facing challenges currently.
Though Check asserts that a 5% difficulty isn't disastrous, he suspects Bitcoin miners might be offloading some of their possessions, yet it doesn't imply a total sell-off. A hash ribbon inversion takes place when the 30-day hash rate moving average plunges below the 60-day average, indicating a phase of mining difficulty that could stem from higher operational costs, a fall in Bitcoin's price, or equipment issues among miners.
Due to the Bitcoin Halving on April 20, there was a noticeable drop in the Bitcoin hash rate as mining companies began to shut down unprofitable mining rigs. Occurring every four years, the halving event cuts miner rewards by half. The April 20 halving brought down mining rewards from 6.25 BTC to 3.125 BTC.
Currently, the Bitcoin network hash rate stands at 586 exahash per second (EH/s), marking a 2% drop over the past month, as per Blockchain.com data. Check proposes that while miners might be grappling to stay afloat now, they're possibly breaking even as they mine new Bitcoins to cover operational expenses.
Bitcoin miners might just be maintaining equilibrium currently. Check says, "They may not be spiraling down in a full-scale bear market but probably just staying afloat", echoing sentiments of other analysts about the declining profitability for Bitcoin miners.
Most Bitcoin miners are selling their holdings to pay expenses, adds Panos in a June 18 X post. Check also mentioned in a separate post that Bitcoin transaction fees constitute a growing chunk of miner revenues. This necessitates miners to adapt and adjust to fees becoming their main source of revenue, pushing the industry towards further innovation and efficient capital management.
According to Matthew Sigel, VanEck's head of digital assets research, almost all Bitcoin miners are selling their coins, while CLSK manages to retain their BTC and use their relatively USD balance sheet to expand their capacity.
Published At
6/22/2024 8:16:39 AM
Disclaimer: Algoine does not endorse any content or product on this page. Readers should conduct their own research before taking any actions related to the asset, company, or any information in this article and assume full responsibility for their decisions. This article should not be considered as investment advice. Our news is prepared with AI support.
Do you suspect this content may be misleading, incomplete, or inappropriate in any way, requiring modification or removal?
We appreciate your report.