More On The Halvening

At the end of May I wrote One Heck Of A Halvening about the aftermath of the halving of Bitcoin's block reward on April 19^th. Six weeks later it is time for a quick update, so follow me below the fold.

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All the graphs in this post are 7-day moving averages, to filter out some of the noise. The first shows what the halvening did to the hash rate. Before the halvening it was around 620EH/s. Except for a spike up to 657EH/s on 26^th May, after the BTC "price" hit nearly $71.5K, it has hovered around 580EH/s. Since power is the biggest cost, the miners' costs have dropped up to 6.5% since the halvening.

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The second graph is much more dramatic. It shows miners' revenue dropping from around $70M/day before the the halvening to around $30M/day after, a drop of 57%. So with costs down 6.5% and revenue down 57% their margins have taken a huge hit.

Back in May I wrote:

Lets start back in October when the Bitcoin "price" was in the high $20Ks. This was a problem, because only the most efficient miners could make a profit at that "price".

Mysteriously, that was when Tether's money printer started running at full speed, and the "price" got pumped up to around $70K. If I'm right that only the most efficient miners could make money with the "price" in the high $20Ks, and if their (income - costs) has dropped 50%, the most efficient miners need the "price" to be in the mid-$50Ks. Mysteriously, the mid-$50Ks is where the "price" has dropped to, down 21% since its last peak on June 5^th.

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That the hash rate was broadly flat after the halvening is interesting. Before the pre-halvening pump started, with the BTC "price" roughly flat, there was a slow but steady increase in the hash rate reflecting Bitmain's shipments of new, efficient chips displacing a smaller contribution from older chips being turned off. Bitmain's shipments continued, but once the block reward was halved many more of the less efficient chips should have been turned off, and the hash rate reduced. This didn't happen, and I can see two possible explanations:

• It may be that mining power is highly skewed, with the vast majority coming from the latest chips running on low-cost power which are still profitable after the halvening. Then the shutdown of a huge number of older chips sucked in by the pre-halvening pump would have had only a small reduction in the total hash rate.
• It may be that miners are burning their excess profit from the pre-halvening pump by staying in the market rather than pivoting to AI, each hoping to be among the survivors from the eventual cull.

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Another feature of the halvening was a massive spike in transaction fees to over $40/transaction. The third graph shows this spike, and a smaller one around the peak in the BTIC "price". But it also shows that right now no-one wants to transact, because the average fee is now $1.72. So the miners are once again almost entirely dependent upon inflating the currency with block rewards.

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The last graph shows the total cost of a transaction. It shows that the fee spike around the "price" peak made little difference, The current average cost per transaction is $48.57, of which $1.72 is the fee. So the system is 96.5% supported by inflation; there is currently no risk of the dangers associated with Fee-Only Bitcoin.