Bitcoin mining fundamentals are rising stronger as miners kill from higher BTC rates.
According to data from Glassnode, Bitcoin (BTC) mining companies made over $4 million in just under an hour on Feb. 12, making it the biggest hourly revenue in history.
In May 2020, Bitcoin underwent a third block reward halving in its history, slashing the amount of new Bitcoin mined by half.
“After a block reward halving, the amount of BTC miners can mine using computing power decreases by half. Hence, miner revenues decrease by 50% overnight, which could cause strain on mining operations in the short term.”
Around the same time, the hash rate of the Bitcoin network is still at new all-time highs, with the fourth consecutive upward difficulty change estimated to be approximately 2.5 per cent in seven days.
So why are Bitcoin miner revenues surging?
Block reward halving happens every four years to reduce the exchange rate of the remaining supply of Bitcoin.
As Bitcoin is nearing its fixed supply of 21 million, the rate at which the latest BTC is being mined is being halved. But halving may put huge pressure on miners who rely on the BTC they mine to cover their operating costs in the short term.
Theoretically, when a halving happens, the price of Bitcoin is expected to increase due to a reduced supply of new coins entering the market. As a consequence, a higher BTC price will make up for a lower number of BTC miners being compensated with block mining.
This week, Bitcoin miners created the largest hourly revenue in history, despite mining half the BTC they used to mine compared to last year.
This shows that Bitcoin is working as intended to increase its value by halving block rewards, motivating miners to increase their hash rate, and investing in network security. Analysts at Glassnode have said:
“#BTC miners just made over $4 million in a single hour – the highest hourly miner revenue in Bitcoin’s history so far.”
Another explanation for the rise in mining revenue is the growing number of network transactions and the resulting fees charged to the miners as a result. Miner revenue consists of transaction fees plus block incentives collected by miners, the former accounting for approximately 13.5 per cent of the total revenue, according to Clarkmoody’s results.
Will miner revenue continue to increase with BTC price?
PlanB, a pseudonymous Bitcoin researcher behind the famous Stock-to-Flow (S2F) price model, said Bitcoin is on track to hit $288,000.
The S2F model relies heavily on the supply of BTC (stock) and the new mined Bitcoins (flow), predicting BTC’s price trend on the basis of its scarcity. PlanB has written:
“#bitcoin price track after 2020 halving is between 2012 and 2016 tracks. I added S2F ($100K) and S2FX ($288K) model targets. Targets are average prices, actual BTC price will oscillate around targets. If 2021 bull market follows 2017 then $100K it is, if we follow 2013 .. $288K.”
At present, Bitcoin is consolidating after hitting a new all-time high of $48,500. If the price of BTC is close to $60,000, the market capitalisation of the cryptocurrency will be more than $1 trillion.
Moreover, at around $56,000, analysts say there’s a big options for a gamma squeeze waiting for bitcoin. As a result, the likelihood of BTC increasing to about $53,000 to $56,000 remains high in the first half of 2021.
Lex Moskovski, a cryptocurrency analyst and quant trader, also stressed that market sentiment remains optimistic due to growing institutional interest.
“Any institution, company, and individual that holds any of the ETF below or plain $TSLA, holds #Bitcoin as well. Tesla has pulled the ultimate trojan horse. Let’s welcome Warren Buffett and Swiss National Bank. Holding TSLA? You are long $BTC.”
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