After the halving event, the Bitcoin network initially did much better than anticipated because it coincided with the launch of the Runes protocol. But this didn’t change the fact that after the halving, the difficulty of mining BTC increased exponentially, making it hard for miners to earn rewards. 10x Research, a digital asset research for traders and institutions, commented on Bitcoin mining wars.
Decline in Mining Revenue
Runes is a protocol that allows minting meme coins on top of the Bitcoin network. This allowed Bitcoin transaction fees to remain high after the Bitcoin halving, generating over $135 million in fees in the first week. Although Bitcoin miners benefited from the high fees, it also increased the difficulty of mining because the more fierce the competition the higher the difficulty.
Bitcoin Faces Correction but Analysts See Bull Market Potential AheadHowever, due to the decline in transactions in early May, daily mining revenue dropped from $70M to $30M. Furthermore, with the mining rewards dropping to 3.125 BTC, projections were made that the hash rate in the network would decrease significantly. The reason is that the miners who operate with less efficient mining equipment would no longer be able to mine profitably and would shut down, resulting in a drop in the hash rate.
Mining Stocks Drops as Investors Shift to Bitcoin ETFs
Some of the biggest listed mining companies, Marathon Digital and Riot Platforms, have dropped 10% and 33%, respectively. Market analysts believe the launch of 11 Bitcoin ETFs has caused some investors to change their investment strategies, opting to rotate out of mining stocks. Pascal St-Jean, president of the global digital asset investment manager 3iQ, said,
“There’s been a lot of institutional money flow into the ETFs as opposed to using the miners as a proxy for exposure to bitcoin.”
According to Blockchain.com, Bitcoin’s network difficulty, which measures the difficulty of mining a block, has increased steadily since the start of the year.
