Bitcoin (BTC) ordinals boost miner profits, but “income stress” looms, new research warns.
In the latest edition of its weekly newsletter “The Week On-Chain,” analytics firm Glassnode predicted new problems for miners after the next Bitcoin block subsidy halving.
The impact of the Bitcoin halving on miners could be “severe.”
Competition for Bitcoin miners is exploding, and the hash rate – the estimated combined processing power provided to the blockchain – is reaching record highs.
For Glassnode, this suggests unprecedented conditions for miners trying to make a living at the current BTC price levels.
Order inscriptions are helpful because they act as “pack fillers,” turning empty block space into a source of income for miners.
“Of course, miners’ revenues will have a positive impact as block space demand increases,” it said.
Bitcoin Mean Hash Rate (7-day moving average) chart (screenshot). Source: Glassnode
The share of revenue from fees has increased by 1% to 4% compared to the lows during the Bitcoin bear market, but remains modest by historical standards.
“Meanwhile, the amount of hashrate competing for these rewards has increased by 50% since February as more miners and newer ASIC rigs become established and come online,” notes The Week On-Chain.
This hash rate increase lays the groundwork for an impending showdown. In April 2024, miner rewards per block will drop by 50%, which will double the so-called “production cost” per BTC. Currently the price is around $15,000 and will be over $30,000 – above the current spot price.
Glassnode presented two models for estimating the price at which miners will go into loss overall, comparing output to mining difficulty above.
“Using this model, we estimate that the acquisition price of the most efficient miners in the network is approximately $15.1k,” the researchers explained.
“However, the purple curve shows the ‘doubling’ of this level post-halving to $30.2K, which would likely put the majority of the mining market in severe income stress.”
Bitcoin difficulty per issuance pricing model (screenshot). Source: Glassnode
A previous model put the average acquisition price for miners at $24,300 per Bitcoin – about 8% below the current level as of September 28th.
Bitcoin difficulty regression model (screenshot). Source: Glassnode
BTC price incentives
Others are more optimistic about how miners will handle the halving preparations.
Related: Bitcoin exchange volume hits 5-year lows as Fed encourages BTC hodling
In an interview with Cointelegraph this month, analyst Filbfilb, co-founder of trading suite DecenTrader, reiterated that miners would increase their BTC holdings ahead of the event.
“Miners are incentivized to ensure prices are well above marginal cost before halving,” he wrote in an X (formerly Twitter) thread in August.
“Whether they consciously cooperate or not, they are collectively incentivized to raise prices before their marginal revenue is effectively halved.”
BTC/USD chart with miner accumulation data. Source: Filbfilb/X
BTC supply dynamics are supported by smart money “buying the rumor” about the halving and its own impact on the amount of BTC minted, according to Filbfilb.
This article does not contain any investment advice or recommendations. Every investment and trading activity involves risks and readers should conduct their own research when making their decision.
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