What Happened to the Market After Bitcoin Halving?
Bitcoin successfully completed its fourth halving on April 20th, reducing the block reward to 3.125 BTC. The halving first affects mining, as miners’ income decreases sharply in the short term. Additionally, the halving will also impact Bitcoin’s inflation rate, as the increase in scarcity is expected to drive up the price of the cryptocurrency.
However, the reality is that since the halving, Bitcoin has remained in a high-level consolidation phase, with a slight decrease in price of 3.87%. This puts pressure on miners and has resulted in losses for many short-term investors.
Essentially, each halving is another dynamic balance of market supply and demand. In this process of rebalancing, what trends in market capitalization are worth noting? What specific pressures are miners facing? And what is the current demand for Bitcoin?
According to PAData, a data column under PANews, after the halving in March, the proportion of loss chips in Bitcoin has continuously increased from 1.28% to 15.18%. The mean SOPR index for short-term investors after the halving is 0.99972, indicating that many short-term investors have suffered losses due to the expectations of reduced production.
After the halving, the circulation rate of on-chain tokens has decreased by 23%, indicating that more chips are being accumulated. In terms of holding periods, there has been a significant increase in the quantity of chips held for 1 to 3 months, 3 to 6 months, and 3 to 5 years since the beginning of this year. Looking at different balance ranges of holding addresses, the number of addresses with balances between 100 BTC and 1000 BTC, as well as 1000 BTC and 10000 BTC, has increased by more than 1.3%.
Miners are facing greater revenue pressure after the halving, with the shutdown price estimated at $55,000, a significant increase from the lowest shutdown price of $14,300 in August last year.
Currently, the total daily mining revenue is about $26.4871 million, a decrease of 51.63% from the daily average revenue of $54.7623 million before the halving. The daily transaction fees are approximately $2.28 million, a decrease of 34% from the daily average fees before the halving.
Assuming transaction fee income remains unchanged, maintaining the current average transaction fee and number of transactions, the price of Bitcoin would need to reach $94,489.82 to achieve the pre-halving daily average revenue level, an increase of 51.63% from the current price.
Assuming the price of Bitcoin remains unchanged, achieving the pre-halving daily average revenue level would require the number of transactions to reach 1.6737 million, an increase of 202.49% from the post-halving daily average, or an average transaction fee of 0.00080317 BTC, an increase of 206.08% from the post-halving daily average.
The launch of the Runes protocol initially brought significant demand and huge profits for miners, contributing 881 BTC in transaction fees on its first day.
One potential market consensus is that the price of Bitcoin will increase significantly after the halving. Historical data shows that the price of Bitcoin increased by 8069.11%, 256.85%, and 478.10% within one year (365 days) after the past three halvings.
However, in the short term, the impact of the halving on the price of Bitcoin is gradual. After the past three halvings, the price of Bitcoin increased by 9.73%, 0.97%, and 6.98% within the short term (17 days). But since the current halving, Bitcoin has remained in a high-level consolidation phase, with a current price of around $62,400, a decrease of 3.87%.
The lower-than-expected price has led to a significant increase in the proportion of loss chips in the market. Since the halving, the price of Bitcoin has been consolidating above $62,500, while the proportion of loss chips has increased from 10.95% to 15.18%. In fact, the increase in the proportion of loss chips began before the halving. Since March, the price of Bitcoin has been consolidating above $62,500, while the proportion of loss chips has continuously increased from 1.28%.
This indicates that many short-term investors have suffered losses due to the expectations of reduced production.
The SOPR index of short-term investors also indirectly confirms this possibility. The index, which is less than 1, indicates an overall loss for investors who hold Bitcoin for more than 1 hour but less than 155 days.
According to data from CryptoQuant, 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 have been in an overall loss state recently.
While the price is low, the circulation rate of chips on the chain has also significantly slowed down. According to data from Glassnode, the current circulation rate (7-day moving average) is 0.01044, a decrease of nearly 23% from 0.01356 on the day of the halving. Compared to the beginning of the year, it has decreased by nearly 33%, a significant decline.
The rapid decline in circulation rate may indicate that more chips are being accumulated. Looking at holding periods, there has been a significant increase in the quantity of chips held for 1 to 3 months, 3 to 6 months, and 3 to 5 years since the beginning of this year. In particular, the proportion of chips held for 1 to 3 months has increased by 7.14% this year, and by 2.44% after the halving, indicating a trend of accumulation from short-term to medium-term holding periods.
Looking at different balance ranges of holding addresses, there has been a significant increase in the number of addresses with balances between 100 BTC and 1000 BTC, as well as 1000 BTC and 10000 BTC, in addresses marked as entities (clusters of addresses controlled by the same network entity, such as exchange addresses, foundation addresses, whale addresses, miner addresses, etc.). These increases have persisted 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, with chips being accumulated.
After the halving, there has been a significant decrease in network hash rate (7-day moving average). According to data from Glassnode, 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, indicating that miners have shut down some of their mining machines to maintain profitability.
Based on data from f2pool, miners are facing greater revenue pressure due to the shutdown price of different mining machines. Calculated based on the price of $62,315.29 on the day of data collection, if the mining machines are located in areas with lower electricity costs and charged at $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 data from BTC.com, the lowest shutdown price was still $14,300 in August last year.
If the mining machines are located in areas with higher electricity costs and charged at $0.12 per kWh, there are only 3 models of mining machines that can remain profitable, namely the Antminer S21Pro, Antminer S21 Hyd, and Antminer S21, with a shutdown price 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 the electricity cost remains low, when the price of Bitcoin rises to $80,000, the number of mining machine models that can remain profitable will reach 45. The Antminer S21Pro still has the lowest shutdown price, and the highest daily net revenue is achieved by the Whatsminer M63S (390T), reaching $12.30. When the price of Bitcoin rises to $100,000, the number of mining machine models that can remain profitable will reach 66. The Antminer S21Pro still has the lowest shutdown price, and the highest daily net revenue is achieved by the Whatsminer M63S (390T), reaching $18.41. As the price of Bitcoin rises, miners will have a wider range of mining machine options and can diversify their configurations.
After the halving, mining revenue has already decreased. According to data from CryptoQuant, the current total daily mining revenue is about $26.4871 million, a decrease of 51.63% from the daily average revenue of $54.7623 million before the halving. However, it is worth noting that on the day of the halving, the launch of the Runes protocol contributed to a mining revenue of approximately $107 million, an increase of 95.06% from the daily average revenue before the halving.
The strong increase in on-chain demand can offset the losses for miners caused by the halving. On the day of the Runes protocol launch, transaction fees reached $80.58 million, accounting for 75% of the total revenue. However, as the excitement around Runes cools down and transaction volume decreases, the current daily transaction fees are approximately $2.28 million, a decrease of 34% from the daily average fees before the halving.
Miners’ mining revenue (in USD) = (block reward + transaction fees) * price
Therefore, the decrease in mining revenue caused by the halving can be compensated in two ways. First, assuming transaction fee income remains unchanged, the price of Bitcoin needs to increase significantly. Second, assuming the price of Bitcoin remains relatively stable, transaction fee income needs to increase significantly and continuously.
Of course, this is a simple static analysis aimed at demonstrating the potential impact of the halving on the price and transactions of Bitcoin.
According to data from CryptoQuant, the daily average mining revenue before the halving was $54.76 million. After the halving, the average daily number of blocks is 139, resulting in an average block reward of 434.23 BTC. The average transaction fee per transaction is 0.0002624 BTC, and the average daily number of transactions is 553,328.19.
Assuming transaction fee income remains unchanged and the current average transaction fee and number of transactions are maintained, to achieve the pre-halving daily average 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 of Bitcoin remains unchanged and transaction fee income remains unchanged, to achieve the pre-halving daily average revenue level, the number of transactions would need to reach 1.6737 million, an increase of 202.49% from the post-halving daily average. Alternatively, the average transaction fee per transaction would need to reach 0.00080317 BTC, an increase of 206.08% from the post-halving daily average.
Bitcoin’s demand side is still weak, as seen from the decline in TVL and various data related to Runes. The impact of the halving on mining is of significant importance, as unprofitable miners pose a threat to the underlying security of the blockchain. Apart from the price, transaction fees and the number of transactions are direct indicators of demand. So, what is the current demand for Bitcoin?
According to Dune Analytics’ dashboard data from @cryptokoryo, the number of related transactions has decreased from an initial 463,600 to the current 79,400, and the generated 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 significant profits to miners. The current challenge is how to maintain the sustainability of demand for various Bitcoin projects like Runes.
Additionally, the imagination of Bitcoin’s Layer2 and Runes-driven DeFi may also stimulate more usage demand. From the current situation, according to DefiLIama, the total value locked (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, apart from the Lightning Network, AINN Layer2, which was recently launched, has also performed well, with a current TVL of $590 million, becoming a major application in the Bitcoin ecosystem. In addition, applications such as BiFi, Maya Protocol, and BoringDAO have also experienced rapid growth in TVL this year.