As a seasoned analyst with over two decades of experience in the financial markets, I’ve witnessed numerous cycles of boom and bust, and the current state of Bitcoin is no exception. The recent surge in Bitcoin prices has brought new life to the mining industry, providing a much-needed boost to miners who have been struggling through the bear market.
The increase in Bitcoin‘s price during July significantly boosted miner profits, encouraging more mining activity and reducing the urge to sell. An analysis by CryptoQuant dated July 31 showed that daily miner profits jumped approximately 50% since early July. By July 29, the miners’ collective computing power (hashrate) had reached 604 quadrillion hashes per second (EH/s), a 6% increase from its lowest point on July 9.
A significant surge in daily sales, exceeding $32 million, contrasted with a minimal year-to-date low of $22 million in early July, is driving this recovery. The enhanced income has positively impacted the network’s hash rate recovery, suggesting that miners are experiencing financial improvement.
Reduced Sales Pressure
Over the last month, Bitcoin’s price climbed approximately 6%, peaking at about $66,500. This growth led to a decrease in miner sales due to increased revenues. The report suggests that miner outflows, or the amount of BTC miners are selling, have been lower compared to earlier in the year. This trend indicates less selling pressure as the price recovers.
#Bitcoin network hashrate is less than 2% from all-time-high.
Miners expanding as prices recover.
— Julio Moreno (@jjcmoreno) July 31, 2024
In July, the daily Bitcoin miner outflow fluctuated between $5,000 and $10,000, which is a significant drop compared to the range of $10,000 to $20,000 seen when Bitcoin first surpassed $70,000.
Due to miners making profits from increased Bitcoin prices prior to the halving event, they’re less inclined to sell because their incentive to mine has decreased by 50%. The halving is a built-in deflationary mechanism in Bitcoin, which means that the rewards for creating new blocks are cut in half every four years.
Disparity among miners
Despite the resurgence in Bitcoin’s price, smaller miners haven’t reaped the same benefits. In contrast, larger mining operations have managed to increase their Bitcoin holdings significantly in 2024. For instance, data from CryptoQuant indicates that these large-scale miners owned approximately 65,000 BTC as of July 29, up from 61,000 BTC at the start of the year.
Contrastingly, the smaller mining operations saw a decrease in their Bitcoin holdings, falling from 59,000 BTC to 51,000 BTC post the halving incident. This decline seems to have been followed by an increase in sales.
Currently, transaction fees make up approximately 1.72% of the overall mining earnings, which is the smallest percentage since October 2023. The report suggests that miners might face an issue if these fees remain low, as their profits would become highly reliant on the price of Bitcoin.
In simpler terms, the surge in Bitcoin’s value has significantly impacted the mining sector. This rise has led to increased profits and decreased urgency to sell for larger miners. However, smaller miners have faced difficulties due to this trend, highlighting the disparities within the cryptocurrency market.
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2024-07-31 22:45