What’s Driving Bitcoin Miner Fees Down?

  • BTC miners’ revenue from royalties fell to their lowest level in three months.
  • BTC miners refuse to sell their coins as the Exchange to Miner indicator rises.

Sitting at 2.61% at press time, the percentage of miners’ revenue from fees paid to use Bitcoin [BTC] network fell to its lowest level in the last three months, data from Messari show.

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The decline in BTC miner revenue from fees in recent months is attributable to the steady decline in transaction fees paid to use the network, despite the increase in transaction volume on the Layer 1 (L1) network.

According to on-chain data provider InTheBlocktotal fees paid to process transactions on the Bitcoin network have fallen 38% since March to their lowest point in four months.

Once upon a time…

According to data from Messari, the value of the average fee paid per transaction on the Bitcoin network peaked at $30.36 on May 8, the highest daily fee in the past year.

Source: Messari

The surge in transaction fees was due to an increase in transaction volume on the Bitcoin network when the hype around Ordinals NFT Collection invaded the market. According to data from Glassnode, nearly 600,500 daily transactions on average were recorded in May, which led to an increase in fees paid to use the network.

Source: Glassnode

When Bitcoin’s average transaction fees hit a one-year high on May 8, the percentage of miner revenue from fees also jumped to 33%, its highest level in five years.

However, as the ordinal craze died down, transaction activity returned to normal, resulting in lower transaction fees. Consequently, the percentage of miners’ income from royalties has also decreased.

Source: Messari

Miners say ‘no’ to letting their bags go, but here’s the catch

According to pseudonymous CryptoQuant analyst Tarekonchainan assessment of BTC’s Exchange to Miners indicator found that while mining revenue from fees may have been hit in recent months, miners on the L1 network have refused to sell their BTC holdings.

Source: CryptoQuant

The Exchange to Miners indicator tracks the flow of cryptocurrency from miners to exchanges. When this rallies, it suggests an increase in BTC accumulation by miners on the Bitcoin network.

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Tarekonchain noted:

“The pronounced spike in the Exchange to Miners indicator suggests that miners are actively accumulating Bitcoin and choosing to hold onto their assets rather than rapidly converting them back into stablecoins or fiat currencies.”

On what this means for the general market, Tarekonchain concluded:

“The preference of miners to hold Bitcoin in their wallets can signify long-term positive sentiment regarding the future value of Bitcoin. This reflects a belief among miners that holding Bitcoin could generate greater profitability over time.

However, it is essential to pay attention to Bitcoin’s Puell Multiple indicator. This indicator provides insight into the profitability of mining operations and helps identify potential turning points in the cryptocurrency market.

When the Puell multiple reaches a high value, it suggests that mining revenues are relatively high compared to the long-term average. This situation often indicates that miners have a strong incentive to sell their newly mined BTC, potentially increasing selling pressure in the market. On the other hand, a low Puell multiple indicates that mining revenues are relatively low compared to the historical average, which may discourage miners from selling and potentially lead to less selling pressure.

According to CryptoQuant analyst Joao Wedson:

“The Puell Multiple recently hit a long-term trendline dating back to 2017. Interestingly, in 2021 when the price moved higher after the indicator hit resistance, a subsequent downtrend s occurred, marking the end of the bullish cycle.”

Source: CryptoQuant

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