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Kaiko Analysis: Plummeting Bitcoin Miner Fees May Lead to Increased Forced Selling

(Tuesday-02 July 2024, 22:05 AM IST):

Bitcoin miners, the backbone of the Bitcoin network, are facing a double whammy, according to recent analysis by Kaiko, a leading crypto research firm. Here’s the lowdown:

  • Fees Falling Faster Than Your Hopes: Transaction fees, a crucial source of income for miners, have plummeted from a January average of $45 to a meager $3-$5 as reported by Bloomberg. That’s a rough drop, especially since mining costs like electricity and staff salaries remain high.
  • Halving Relief MIA: Historically, Bitcoin price increases followed “halving” events (where block rewards are cut in half) to offset the reward reduction for miners. This time, however, Bitcoin’s price has remained stagnant since the April 19th halving, leaving miners with fewer rewards that aren’t worth as much.
  • A Brief Respite: There was a glimmer of hope in April when a surge in non-fungible token (NFT) minting boosted fees for a short while. Unfortunately, that was a temporary fix, and fees quickly dropped back to their current low levels.

The Potential Fallout:

Kaiko warns of two possible consequences:

  • Forced Selling: With profits shrinking, some miners may be forced to sell their Bitcoin holdings, like Marathon Digital, to stay afloat. This could put additional downward pressure on the price of Bitcoin.
  • Consolidation Looming: The financial strain might lead to mergers and acquisitions as miners combine resources and cut costs. Kaiko expects this trend to pick up steam as the industry adjusts to the post-halving environment.

The Bottom Line:

Falling fees and stagnant prices are squeezing Bitcoin miners. Kaiko’s analysis suggests that forced selling and industry consolidation could be on the horizon for the Bitcoin mining world. Buckle up, because things might get interesting!

Reference: Bloomberg.

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