Crypto

Bitcoin Miners May Sell $5B Amid Fee Drop, Halving Impact

Halving cuts Bitcoin mining rewards to 3.125 BTC, sparking fears of increased miner selling amid falling fees and market pressures.

By Barry Stearns

5/15, 03:51 EDT
Bitcoin / U.S. dollar
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Key Takeaway

  • Bitcoin miners may increase selling due to lower transaction fees and halved block rewards, putting additional pressure on BTC prices.
  • Post-halving, transaction fees spiked but quickly returned to pre-halving levels, exacerbating revenue challenges for miners.
  • Analysts predict a potential $5 billion BTC sell-off by miners in the coming months amidst declining bitcoin prices.

Miners Adjust to Halving Impact

Bitcoin miners have been navigating a challenging landscape following the recent halving event on April 19, which saw the reward for mining new blocks on the blockchain cut in half. This significant reduction in block rewards from 6.25 BTC to 3.125 BTC has placed increased pressure on miners to find profitability elsewhere, primarily through transaction fees. According to Kaiko, the initial aftermath of the halving saw a spike in daily average network fees, providing temporary relief to miners. However, as the excitement around the Runes protocol waned, fees plummeted, potentially leading to increased selling pressure from miners to sustain operations.

Market Pressures Intensify

The reduction in miner revenue is compounded by external market pressures, including the potential $9 billion payout from the Mt.Gox settlement and the overall decline in Bitcoin's price, which has fallen over 4% to $61,990 since the halving. Kaiko analysts suggest that the combination of reduced block rewards and declining transaction fees could force miners to sell a significant portion of their holdings, estimated by Markus Thielen, head of 10x Research, to be around $5 billion worth of BTC in the coming months. This sell-off, driven by the need to cover operational costs, could exacerbate the downward pressure on Bitcoin's price.

Liquidity and Mining Dynamics

The halving event not only impacts miner revenue but also has broader implications for market liquidity and mining dynamics. Kaiko's report highlights concerns that forced sales by miners during the typical summer slowdown in trading activity could further strain liquidity. Additionally, the recent 6% drop in mining difficulty, the largest since December 2022, presents an opportunity for miners with lower operational costs to capture a larger market share. This adjustment in mining difficulty, while beneficial for some, underscores the ongoing challenges faced by the mining sector in adapting to the new reward structure.

Street Views

  • Analysts at Kaiko (Neutral on Bitcoin):

    "Daily average network fees spiked after the halving, offsetting some pain for bitcoin miners. However, fees have since come down as the initial rush of users to the Runes protocol cooled off... The recent decline in fees could lead to selling pressure from miners."

  • Markus Thielen, 10x Research (Bearish on Bitcoin):

    "Why would they keep inventory when the price is not going up."

  • Deribit (Bearish on Bitcoin):

    "Bitcoin forms lower highs and miners facing shrinking revenues and fees, are pressurized to sell their holdings. For traders looking to navigate this market, the Bear Call Spread strategy can be a suitable approach to consider."