Analysts at research and brokerage firm Bernstein said: bitcoin BTC
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We are experiencing a “DeFi summer” moment as the new Runes token standard helps spark record daily miner rewards and transaction fees.
“Bitcoin is no longer a ‘plain vanilla’ blockchain where nothing happens other than simply ‘HODLing’ BTC,” Gautam Chhugani and Mahika Sapra wrote in a note to clients on Monday. “Bitcoin is experiencing a ‘Defi summer’ like the moment Ethereum experienced in 2020. “This moment saw the launch of several decentralized apps and tokens on the Ethereum blockchain, resulting in a surge in liquidity and transaction fees.”
Bitcoin’s fourth halving occurred at 00:09 AM ET on April 20 (8:09 PM ET on April 19), reducing miners’ block subsidy rewards from 6.25 BTC to 3.125 BTC.
Bitcoin miners earned a total of $60-70 million in daily subsidies and transaction fee compensation leading up to the halving. However, this amount jumped to $107.75 million on April 20, even though miners received half of the subsidy reward per block, according to Blockchain.com data. About 75% of this ($80 million) came from transaction fees alone per Glassnode data, both record highs.
Miner’s daily profit. Image: Blockchain.com.
For blocks over 100, transaction fees exceed subsidy rewards.
According to Bitcoin explorer Mempool, after halving block number 840,000, fees accrued $2.4 million (well above the block subsidy reward worth about $200,000), and Bitcoin recorded 104 block transaction fee rewards higher than the subsidy. .
“Bitcoin has set a record of 100 consecutive blocks with transaction fees exceeding the block subsidy. It’s great to see the experiment progressing and proving the theory that fees can maintain thermodynamic security budgets!” said Jameson Lopp, co-founder of Casa.
Bitcoin mining rewards. Image: Bernstein.
In fact, with the exception of what appears to have been an accidental $3 million overpayment last November, all of Bitcoin’s top 10 most valuable blocks have been mined since the halving.
Activity surges due to rune hype
Much of the transaction fee activity can be attributed to the hype surrounding Runes, Bitcoin’s new fungible token standard that launched around the time of the halving. “This is driven by speculative activity by retail traders to issue new tokens (mainly meme tokens),” Bernstein analysts said.
The Runes protocol was developed by Ordinals creator Casey Rodarmor and provides a more efficient solution for “etching” (creating) tokens in Bitcoin compared to BRC-20 tokens using the Ordinals inscription.
“The Bitcoin blockchain is seeing developer activity and the launch of new token protocols, attracting retail traders to new tokens, leading to a surge in ‘fees’ on the Bitcoin network,” Chhugani and Sapra explained. “The process of issuing tokens requires users/traders to pay a fee to have their transactions included in Bitcoin block space, and excess demand for token issuance will increase competition, causing Bitcoin transaction fees to rise. It’s possible.”
According to rune explorer Unisat, more than 7,000 rune tokens have been issued so far, of which “SATOSHI·NAKAMOTO” is the most held.
As the hype around Runes dies down, trading fees are dropping.
Despite the initial hype, YCharts data shows that average transaction fees have decreased significantly from a high of $128.45 on the day of the halving to $34.80 on April 21, and total daily mining revenue has fallen to about $51 million. The average fee is now down to about $10, according to Mempool data.
Bernstein analysts cautioned that investors should not assume higher fees in the future, but noted the untapped market potential for Bitcoin fungible tokens. “The value of DeFi tokens and other utility tokens on Ethereum exceeds more than $200 billion (compared to the current market capitalization of Bitcoin),” Chhugani and Sapra said. “Although Runes launched as a meme token, over time we may see more utility-based fungible tokens on Bitcoin.”
Regarding the impact on miners going forward, the analysts added, “We expect network transaction fees to account for 15% of miners’ revenue on a sustainable basis.” “However, speculative enthusiasm for blockchain could last six to 18 months or more, so we wouldn’t be surprised if miners continue to enjoy their normal windfalls for now.”
Bitcoin mining company stock prices soar as hashrate remains stable
“Before the Bitcoin halving, miners were in an official bear market,” the analysts said. “This is because miners’ BTC rewards are halved every four years. Therefore, investors are not feeling well about Bitcoin miners and mining stocks pre-halving, which is reflected in the severe underperformance of Bitcoin miners to date.”
But shares of public Bitcoin miners soared ahead of Friday’s halving activity, with Riot Platforms and Marathon Digital up about 10% on the day and rival CleanSpark up 6%.
The total hash rate of Bitcoin miners has also remained steady at around 620EH/s since the halving. “This is not surprising, considering the healthy Bitcoin dollar price above $64,000 and the unusual windfall in network transaction fees,” Chugani and Safra said. “We expect the hash rate to fall only if Bitcoin’s price action weakens from here and ETF flows weaken, reaching new local lows. We believe this scenario seems unlikely and miners will continue to maintain capacity beyond the halving.”
According to The Block’s price page, Bitcoin is currently trading at $66,106 and is up 1.8% in the last 24 hours.
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