Bitcoin (BTC) Ordinals boost miners’ profits, but warn of “revenue strain” ahead, according to new research.
In the latest edition of its weekly newsletter, “The Week On-Chain,” analytics firm Glassnode predicts new problems for miners following the upcoming Bitcoin block reward halving.
The impact of Bitcoin’s halving on miners will be “severe”
The competition from Bitcoin miners is heating up, with the hash rate, the combined estimated processing power deployed in the blockchain, at record levels.
For Glassnode, this indicates unprecedented conditions for miners trying to survive at the current BTC price level.
Ordinal inscriptions help, acting as “fillers” that turn empty block space into a source of income for miners.
“Naturally, as the demand for block space increases, the income of miners will be positively affected,” he wrote.
The proportion of income received from fees increased by 1% to 4% compared to the lows seen during the Bitcoin bear markets, but by historical standards remains moderate.
“Meanwhile, the amount of hash rate competing for these rewards has increased by 50% since February, as more miners and new ASIC platforms have established themselves and come online,” said the “The Week On-Chain.”
This increase in hash rate sets the stage for the upcoming showdown. In April 2024, the rewards for miners per block will be reduced by 50%, which will double the so-called “production cost” per BTC. Currently around USD 15,000, it will exceed USD 30,000, above the current price.
Glassnode presents two models to estimate the price at which miners, in general, will fall into the red, comparing the issue of mining difficulty.
“According to this model, we estimate that the most efficient miners in the network have an acquisition price of around $15.1 thousand,” the researchers explained.
“However, the purple curve shows a post-halving ‘double’ of this level to $30.2k, which will likely put most of the mining market under severe revenue stress.”
A previous model put the average extraction price for miners at $24,300 per Bitcoin, about 8% below the current price on September 28.
BTC Price Incentives
Some are more optimistic about how miners will manage to accumulate BTC before the emergence.
In an interview with Cointelegraph this month, analyst Filbfilb, co-founder of trading platform DecenTrader, reiterated that miners will increase BTC accumulation before the event.
“Miners have incentives to ensure prices are above marginal cost before mining,” he wrote in an X (formerly Twitter) thread in August.
“Whether they are intentionally colluding or not, they have a collective incentive to raise prices before their marginal revenue is effectively cut in half.”
Helping BTC supply dynamics is what Filbfilb calls “rumor buying” by “smart money” about the emergence and its own effect on the amount of BTC issued.
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