On-chain data shows that Bitcoin mining revenue is approaching its annual average, a sign that the capitulation may be coming to an end for miners.
Bitcoin mining revenue is now approaching its 365-day simple moving average.
In new mail On the X show, analyst James Van Straten discusses what the current state of Bitcoin miners looks like. There are different ways to measure the state of miners, the most popular of which is the hash rate, which is a measure of the total computing power connected to the Bitcoin network.
Here, however, the analyst used the total daily revenue of the miners on the chain. Miner revenue consists of two parts: block support and transaction fees.
The former refers to the Bitcoin rewards that miners receive as compensation for solving blocks on the network, while the latter is the payment that users collect with individual transactions. Historically, block subsidies have made up a much larger portion of miner revenue than transaction fees.
The chart below shows how aggregated Bitcoin mining revenue has changed over the past few years.
The value of the metric appears to have registered a sharp drop in recent months | Source: @jvs_btc on X
As shown in the chart above, Bitcoin mining revenues started to rise alongside the price rally that started in October last year and hit a new all-time high (ATH) by April of this year.
This rise has occurred for two reasons. First, the monetary backing that is disbursed in Bitcoin is generally fixed in value and frequency, so the only variable associated with it is the price of the asset in US dollars. Therefore, it makes sense that revenues will rise when the price rises.
At the same time, the network is also becoming busy due to the increasing bull market movement. Transaction fees depend on the conditions of the blockchain, where there is only a limited amount of space available in blocks. This space naturally becomes more expensive as competition for transactions increases.
ATH’s revenue surge, in particular, was driven by the arrival of Runes, a new on-chain technology that allows users to mint fungible tokens. Runes-related transactions are similar to any other transactions on the network, so they also impact the network’s economics.
From the chart, it is clear that mining revenue recorded a sharp decline right after this very high level, as its value dropped below the 365-day simple moving average (SMA).
The reason for this was the fourth halving. While block rewards remain constant in value most of the time, there is an exception in the form of halving events. These periodic events, which occur every four years, permanently halve these rewards, thus significantly shaking up miners’ returns.
Since this drop, Bitcoin mining revenue has remained below the 365-day simple moving average, putting many miners under pressure and forcing some to capitulate.
But with the recent recovery, mining companies’ revenues have risen to $35 million, not far from the annual average of $40 million. “This is another way of showing that the capitulation of mining companies is almost over,” says Van Straten.
If the metric can reclaim the 365-day simple moving average, Bitcoin could continue its upward trend, according to the analyst.
Bitcoin price
Bitcoin’s recovery has stalled as its price is still trading around the $66,200 level.
Looks like the price of the asset has slumped to sideways movement over the last few days | Source: BTCUSD on TradingView
Featured image by Dall-E, Glassnode.com, chart by TradingView.com