Bitcoin’s ETFs Kill the Transaction Fees, Punishing the Miners More

Good Morning, Asia. Here’s what’s making information in the markets:

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Bitcoin’s value is holding close to information, however the chain itself is quiet. Glassnode knowledge exhibits transaction charges have collapsed again towards decade lows, whilst BTC flirts with six figures.

In previous cycles, payment spikes tracked bull markets as merchants bid for blockspace. This yr, the payment curve is flat whereas value rises, a transparent signal that onchain demand is now not driving the market.

A brand new report from Galaxy Research exhibits median every day charges have fallen greater than 80% since April 2024, with as a lot as 15% of every day blocks now clearing at simply 1 satoshi per vbyte. Nearly half of latest blocks aren’t full, signaling weak demand for blockspace and a dormant mempool.

This is a pointy distinction to prior bull cycles, the place value rallies translated into congestion and payment spikes.

The knowledge confirms a structural shift: spot ETFs and custodians now maintain greater than 1.3 million BTC, and cash parked in these wrappers not often contact the chain once more.

At the identical time, retail exercise that after clogged the Bitcoin blockchain has migrated to Solana, the place memecoins and NFTs profit from cheaper and quicker execution. The consequence, Galaxy notes, is that the bitcoin value is being set by custodial inflows whereas the community’s onchain demand – as soon as a proxy for value motion – has slowed down.

For miners, this dynamic is especially punishing. With rewards halved to three.125 BTC and costs contributing lower than 1% of block income in July, profitability is below pressure. That stress is pushing listed miners to diversify into AI and HPC internet hosting.

Read extra: Bitcoin Mining Faces ‘Incredibly Difficult’ Market as Power Becomes the Real Currency

A report from earlier this yr by Rittenhouse Research argues that Galaxy Digital’s transfer out of mining altogether might be the mannequin for the sector.

This transfer has been applauded by the fairness markets. While BTC is down greater than 3% on-year, the CoinShares Bitcoin Mining ETF has gained practically 22%. Investors are rewarding corporations which have leaned into diversification quite than counting on block rewards alone.

Listed miners inform an identical story. Hive, Core Scientific, and TeraWulf all reported Q2 outcomes padded by HPC and AI internet hosting revenues.

Those with no diversification, like Bitdeer and BitFuFu, stay deeply uncovered to electrical energy prices, gear depreciation, and a payment market that Galaxy warns in its report is “anything but robust.”

The juxtaposition is telling: Galaxy’s personal analysis warns that the Bitcoin blockchain’s settlement position is stagnating, whereas Galaxy’s stability sheet is being repositioned for progress in AI knowledge facilities.

Onchain knowledge makes the level: with out natural demand for blockspace, charges can’t fund safety. And if charges keep low, fairness markets are portray a transparent image that mining sector’s greatest future returns could come from AI, not Bitcoin.

Market Movements

BTC: Bitcoin traded at $113,286.95, down 1.79%, after briefly plunging to a six-week low close to $110,600, with the broader crypto market dealing with heavy liquidations and volatility.

ETH: Ether traded flat at $4,779 as Jerome Powell’s dovish Jackson Hole remarks boosted expectations of a September price minimize, with asset managers predicting new highs for bitcoin and an ETH breakout above $5,000 regardless of dangers from treasury adoption and fairness volatility.

Gold: Gold closed at $3,371 after Powell’s dovish Jackson Hole remarks boosted September rate-cut odds.

Nikkei 225: Asia-Pacific shares climbed Monday, with Japan’s Nikkei 225 up 1.08%, after Powell signaled potential Fed price cuts in September throughout his Jackson Hole speech.

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