Bitcoin Miners Face 12-Year Low Profitability Amid Fee Decline

Bitcoin miners are currently facing one of their most challenging periods in over a decade, with profitability hitting a 12-year low. This downturn is primarily due to the Total Fees paid on the Bitcoin network reaching their lowest levels since 2012, driven by reduced on-chain activity. This decline in fees directly impacts miner revenue, as lower network activity translates to fewer transaction fees collected by miners.

Additionally, the Hash Rate, which measures the computational power of the network, has decreased, but the Difficulty, which adjusts to maintain a consistent block time, has not. This discrepancy is unusual and puts further pressure on miner margins. Large mining operations are shutting down ASIC machines due to falling revenues and low network demand, leading to a tighter squeeze on profitability. Typically, high Hash Rate Volatility signals network inconsistency and miner uncertainty, prompting a downward Difficulty Adjustment that forces less efficient miners out of the market.

Despite these challenges, miners have not started selling their Bitcoin holdings. According to data, the Miner Flow to Exchange dropped to a monthly low, indicating that miners are holding onto their Bitcoin even during this difficult period. This behavior contrasts with previous cycles, where miners sold during price increases and high blockchain activity. The current holding pattern suggests that miners see no strong reason to sell, as they are still making enough to stay afloat. The Puell Multiple, which measures miner profitability, stood at 1.2, meaning miner earnings are 20% above historical averages despite the poor market conditions.

The decision by miners to hold onto their Bitcoin has implications for the broader market. Reduced selling by significant market players, such as miners, can ease downward pressure on Bitcoin, creating a more stable environment for further growth. If miners continue to hold their Bitcoin, it could set the stage for further gains, potentially pushing Bitcoin towards $109,000. However, if miners find incentives to sell, it could result in higher selling pressure, leading to a retracement to $104,000. The current holding pattern by miners suggests a more stable environment for Bitcoin, but the situation remains dynamic and could change based on future developments.