What Happens to the Market After Bitcoin Halving?
Bitcoin successfully completed its fourth halving on April 20th. After the halving, the block reward decreased to 3.125 BTC. The halving first affects the mining industry, as miner’s income will decrease in the short term. Additionally, the halving will also impact the inflation rate of Bitcoin. Market expectations of increased scarcity will further drive up the price of the cryptocurrency.
However, the actual situation is that after the halving, Bitcoin is still in a sideways adjustment at a high level, with a slight price drop of 3.87%. This puts pressure on miners and has resulted in losses for many short-term investors.
Essentially, each halving is another dynamic equilibrium of market supply and demand. In this process of rebalancing, what are the trends in market funds worth paying attention to? What specific pressures are miners facing? What is the current demand for Bitcoin?
PAData, a data column under PANews, conducted an analysis by integrating current market data, mining data, and other demand-side data. Here are the findings:
Since March, the percentage of Bitcoin chips in loss has been steadily increasing from 1.28% to 15.18%. After the halving, the mean SOPR index for short-term investors is 0.99972, indicating that many short-term investors have incurred losses due to the expectation of reduced production.
After the halving, the on-chain token circulation rate has dropped by 23%, indicating that more chips are in the accumulation process. From a time cycle perspective, there has been a significant increase in the number of chips held for 1-3 months, 3-6 months, and 3-5 years since the beginning of this year. Looking at different balance ranges of holding addresses, there has been a significant increase of 1.3% or more in the number of addresses with balances between 100 BTC and 1000 BTC, as well as between 1000 BTC and 10000 BTC.
Miners are facing greater revenue pressure after the halving. Based on the current price and higher electricity costs, the estimated shutdown price is $55,000, a significant increase from last year’s lowest shutdown price of $14,300 in August.
The current daily mining revenue is approximately $26.4871 million, a decrease of 51.63% from the average daily revenue of $54.7623 million before the halving. The current daily transaction fees are approximately $2.28 million, a 34% decrease from the average daily fees before the halving.
Assuming transaction fee income remains unchanged, meaning the average fee and transaction volume per transaction remain the same, to achieve the pre-halving average daily revenue level, the price of Bitcoin would need to reach $94,489.82, an increase of 51.63% from the current price.
Assuming the price remains unchanged, achieving the pre-halving average daily revenue level would require a transaction volume of 1.6737 million, an increase of 202.49% from the post-halving average, or an average fee per transaction of 0.00080317 BTC, an increase of 206.08% from the post-halving average.
At the initial launch of Runes, there was strong demand that brought huge profits to miners. On the first day of launch, it contributed 881 BTC in transaction fees.
One potential market consensus is that the price of Bitcoin will increase significantly after the halving. Historical data shows that in the year after the past three halvings, the price of Bitcoin increased by 8,069.11%, 256.85%, and 478.10% respectively.
However, in the short term, the impact of the halving on the price of Bitcoin is slow. In the 17 days after the past three halvings, the price of Bitcoin increased by 9.73%, 0.97%, and 6.98% respectively. But this time, Bitcoin is still in a sideways trend, currently around $62,400, with a decrease of about 3.87% in the past 17 days.
The lower-than-expected price has led to a significant increase in the percentage of chips in loss in the market. Since the halving, the price of Bitcoin has been fluctuating between $64,900 and $62,400, while the percentage of chips in loss has increased from 10.95% to 15.18%. In fact, the increase in the percentage of chips in loss started before the halving. Since March, the price of Bitcoin has been adjusting above $62,500, while the percentage of chips in loss has been steadily increasing from 1.28%.
This means that many short-term investors have incurred losses due to the expectation of reduced production.
This possibility is also confirmed by the SOPR index of short-term investors. The index is less than 1, indicating an overall loss for investors who have held Bitcoin for over an hour but less than 155 days.
According to CryptoQuant’s data, the current index is 1.0022, very close to 1, and the mean index after the halving is 0.99972, indicating that short-term investors are in an overall loss state in the near term.
While the price is low, the circulation rate of chips on the chain has also significantly slowed down. According to glassnode’s data, the current circulation rate (7-day average) is 0.01044, a decrease of nearly 23% from the rate on the day of the halving. It has also decreased by nearly 33% since the beginning of the year.
The rapid decline in circulation rate may indicate that more chips are in the accumulation process. From a time cycle perspective, there has been a significant increase in the number of chips held for 1-3 months, 3-6 months, and 3-5 years since the beginning of this year. Especially for chips held for 1-3 months, there has been a 7.14% increase this year and a 2.44% increase after the halving, indicating a trend of accumulation from the short term to the medium term.
Looking at different balance ranges of holding addresses, since the beginning of this year, among addresses marked as Entities (address clusters controlled by the same network entity, such as exchange addresses, foundation addresses, whale addresses, and miner addresses), the number of addresses with balances between 100 BTC and 1000 BTC, as well as between 1000 BTC and 10000 BTC, has significantly increased by 1.35% and 1.39% respectively. This phenomenon still exists after the halving. Among all addresses, the number of addresses with balances between 1000 BTC and 10000 BTC has increased by 1.07%.
These data indicate an increase in the number of large-scale holders, and chips are accumulating.
After the halving, the network’s hash rate (7-day average) has shown a significant decline. According to glassnode’s data, the current hash rate is 582.2 EH/s, a decrease of 7.43% from the day of the halving. The decrease in hash rate is larger than the decrease in price, which may indicate that miners have shut down some mining machines to maintain profitability.
According to data from f2pool, miners are facing significant revenue pressure based on different shutdown prices for mining machines. Based on the price of $62,315.29 collected on the day of data collection, if the mining machine is located in an area with lower electricity costs and charges $0.07 per kWh, there are still 31 models of mining machines that can remain profitable with a shutdown price lower than the current price. Among them, the Antminer S21Pro has the lowest shutdown price of $32,200, with a daily net revenue of $5.52. According to BTC.com’s data, the lowest shutdown price was still at $14,300 in August last year.
If the mining machine is located in an area with higher electricity costs and charges $0.12 per kWh, there are only 3 models of mining machines that can remain profitable, including the Antminer S21Pro, Antminer S21 Hyd, and Antminer S21, with shutdown prices above $55,200.
If the current market conditions do not improve, the electricity cost will be a crucial factor determining the life or death of miners. If the market conditions improve, to what extent will the pressure on miners be relieved?
Assuming electricity costs remain low, when the price of Bitcoin rises to $80,000, the number of mining machines that can remain profitable will reach 45, with the Antminer S21Pro still having the lowest shutdown price and the M63S(390T) from Shennong having the highest daily net income of $12.30. When the price of Bitcoin rises to $100,000, the number of mining machines that can remain profitable will reach 66, with the Antminer S21Pro still having the lowest shutdown price and the M63S(390T) from Shennong having the highest daily net income of $18.41. As the price of Bitcoin rises, miners will have a wider range of mining machine options and can have a diversified configuration.
After the halving, mining revenue has decreased significantly. According to CryptoQuant’s data, the current daily mining revenue is approximately $26.4871 million, a decrease of 51.63% from the average daily revenue of $54.7623 million before the halving. However, it is worth noting that on the day of the halving, due to the launch of the Runes protocol, the daily mining revenue was approximately $107 million, an increase of 95.06% from the average daily revenue before the halving.
Strong growth in on-chain demand can compensate for the loss of mining revenue after the halving through transaction fees. On the day of Runes’ launch, transaction fees reached $80.58 million, accounting for 75% of total revenue. However, as the hype around Runes cools down and transaction volume decreases, the current daily transaction fees are approximately $2.28 million, a 34% decrease from the average daily fees before the halving.
Miner’s mining revenue (in USD) = (block reward + transaction fees) * price
Therefore, the decrease in mining revenue after the halving can be compensated for in two ways: first, assuming transaction fee income remains unchanged, the price of Bitcoin needs to increase significantly; second, assuming the price remains stable, transaction fee income needs to increase significantly and consistently.
Of course, this is a simplified analysis and the purpose is to demonstrate the potential impact of Bitcoin halving on price and transactions.
According to CryptoQuant’s data, the average daily mining revenue before the halving was $54.76 million. After the halving, the average daily block count is 139, which means the average block reward is 434.23 BTC. The average transaction fee per transaction after the halving is 0.0002624 BTC, and the average daily transaction count is 553,328.19.
Assuming transaction fee income remains unchanged, meaning the average fee and transaction volume per transaction remain the same, to achieve the pre-halving average daily revenue level, the price of Bitcoin would need to reach $94,489.82, an increase of 51.63% from the current price.
Assuming the price remains unchanged and transaction fee remains unchanged, achieving the pre-halving average daily revenue level would require a transaction volume of 1.6737 million, an increase of 202.49% from the post-halving average. Alternatively, it would require an average fee per transaction of 0.00080317 BTC, an increase of 206.08% from the post-halving average.
The demand side of Bitcoin is still weak, as indicated by TVL and multiple data from Runes. Assessing the impact of the halving on the mining industry is significant, as unprofitable miners pose a threat to the underlying security of the blockchain. In addition to the price, transaction fees and transaction volume directly reflect demand. So, what is the current demand for Bitcoin?
Looking at Runes, according to the data from @cryptokoryo’s dashboard on Dune Analytics, the related transaction volume has decreased from an initial 463,600 to the current 79,400, and the accompanying transaction fees have decreased from 881 BTC to the current 4 BTC. From the daily mining revenue, it can be seen that the strong demand at the launch of Runes was able to bring huge profits to miners. The current issue is how to maintain the sustainability of demand for various Bitcoin projects like Runes.
In addition, the imagination of Bitcoin’s Layer2 and Runes in DeFi may also stimulate more usage demand. From the current situation, according to DefiLIama’s statistics, the current TVL on the Bitcoin chain has reached $1.208 billion, an increase of 296% since the beginning of this year and has remained stable after the halving. Among them, besides the Lightning Network, the recently launched AINN Layer2 has also performed well, with a current TVL of $590 million, becoming a major application in the Bitcoin ecosystem. Additionally, applications such as BiFi, Maya Protocol, and BoringDAO have also achieved rapid growth in TVL this year.
