12/26/2023 0 Comments

1. Bitcoin Miners Transaction Revenue Clocks 400% YoY Surge in 2023

Bitcoin Miners Revenue Increases Year Over Year

According to a Dec. 23 post on X (formerly Twitter) made by Jameson Lopp, the Co-founder and CTO of BTC self-custody solutions company Casa, Bitcoin miners generated revenue exceeding $10 billion in 2023, adding to the total of $57 billion collected in the past 15 years.

In the post, Loop reckoned the estimation could mean miners immediately convert Bitcoin to fiat currency. However, he said it was improbable that was the case, as miners often embrace “HODLing” onto their Bitcoin asset for potential long-term gains.

This month, miners’ total daily revenue block rewards and transaction fee revenues clocked an annual high of $64 million, almost a 400% increase from its year-to-date value, per data from Ycharts. Since the start of December, the daily mining activity revenue hasn’t dropped below $33.85M, signifying a large profit intake for miners in Q4 2023.

Coin Metrics also revealed the quarterly mining revenues in 2023 surpassed $2B over the last three-quarters of the year, with transaction fees collected by miners climbing over $180M in Q2 and Q4.

Mining Hashrate and Difficulty Soar as Profitability Woes Rise

In 2023, the Bitcoin network witnessed a massive surge in mining hashrate. According to Coin Metric’s State of the Network Q4 2023 Mining report, the hashrate jumped from 250 Exahashes per second (EH/s) at the start of the year to 480 EH/s.

The rise in hashrate has led to a 26% increase in Bitcoin mining difficulty over the past three months, per Coinwarz data.

With the rise in BTC mining hashrate and difficulty, profitability could take a slump, and the upcoming halving event may spell even more woes for miners overall, as the event is set to slash rewards from the current 6.25 to 3.125.

However, experts believe Bitcoin’s halving may subsequently decelerate the fast-rising mining difficulty. Furthermore, the rising hashrate showcases improving network security, which may rapidly help BTC’s price charge toward the bull market.

Earlier this month, CryptoQuant Chief Researcher Julio Moreno posted on X that the Bull-Bear market cycle indicator is signaling a recent transition into a bullish period for the first time since July. Based on the indicator, Moreno believes block rewards will increase faster than mining difficulty, increasing miners’ profitability despite the heightening mining difficulty.

2. Bitcoin Mining Power Hits Record, Squeezing Miner Profits Amid Market Rally

The Bitcoin network’s mining power, known as the hash rate, reached a new peak on Christmas Day, intensifying challenges for miners amid decreasing profitability. On December 25, the hash rate hit 544 exahashes per second (EH/s), marking a 130% growth since the start of the year.

Meanwhile, Bitcoin’s price has surged by over 160% since the beginning of 2023.

Understanding Key Bitcoin Concepts:

●Bitcoin Mining: This is the process by which new Bitcoins are created and transactions are verified and added to the blockchain. Miners use powerful computers to solve complex mathematical problems, and the first to solve the problem gets to add a new block to the blockchain, earning Bitcoin as a reward.

●Hash Rate: This measures the total computational power used to mine and process transactions on the Bitcoin network. A higher hash rate means greater competition among miners to validate new blocks and, generally, a more secure network.

●Hash Price: This refers to the revenue miners earn per unit of computational power. It’s a crucial metric for understanding mining profitability.

●Mempools: These are waiting areas for unconfirmed Bitcoin transactions. A congested mempool with high transaction volume can lead to increased transaction fees and longer processing times.

According to a report by Martin Young for Cointelegraph, Will Clemente of Reflexivity Research observed that despite the 2021 mining ban in China, the network’s robustness remained largely unaffected. He emphasized the resilience and security of Bitcoin as a decentralized monetary system.

According to a report by Martin Young for Cointelegraph, Will Clemente of Reflexivity Research observed that despite the 2021 mining ban in China, the network’s robustness remained largely unaffected. He emphasized the resilience and security of Bitcoin as a decentralized monetary system.

Finally, the Cointelegraph article highlighted that a Glassnode analyst, known as “Checkmatey,” has pointed out the ongoing high transaction fees in the Bitcoin network, noting that the Bitcoin mempools have not been fully cleared for almost a year, indicating sustained fee pressure since February.

3. As Bitcoin surges, miners reap these benefits

Bitcoin’s [BTC] price surge has been extremely beneficial for holders over the last few months. However, as time passed, miners could finally reap the benefits of BTC’s rally as well.

Revenue on the rise

Bitcoin miners generated an average daily revenue of nearly $2 million from transaction fees in 2023, marking a remarkable 400% year-over-year increase.

This surge in revenue not only reflects the growing demand and usage of the Bitcoin network, but also significantly enhances the profitability of mining operations.

The elevated revenue generated by miners plays a crucial role in reducing selling pressure on Bitcoin. When miners have higher earnings, they may be less inclined to immediately sell their newly minted coins to cover operational costs.

This reduction in selling pressure contributes to a more balanced supply and demand dynamic in the market.

The potential impact on Bitcoin’s price is noteworthy. With miners holding onto a larger portion of their newly minted coins, the decreased supply in the market could create conditions that favor price appreciation.

The diminished selling pressure from miners, coupled with sustained demand, can provide a supportive environment for Bitcoin’s price to grow further.

Hashrate spikes

Moreover, the hashrate around BTC also grew. According to recent data, the hash rate for Bitcoin has experienced its fourth-highest adjustment this year. As we approach the halving in April, the hash rate has seen a 343% increase in this cycle.

A higher hash rate generally indicates increased computational power dedicated to securing the Bitcoin network. This enhanced security is crucial for protecting against potential attacks and ensuring the integrity of transactions.

Additionally, a stronger hash rate contributes to the overall resilience and stability of the Bitcoin blockchain.

The growth in hash rate can directly influence mining difficulty levels. The Bitcoin protocol adjusts the difficulty of mining tasks approximately every two weeks to maintain a consistent block creation time.

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Harvey CHEN

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