The number of Bitcoin miners has plummeted: What does this mean?

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The decline in the number of Bitcoin miners, as well as their share of transaction volume, may have a multi-faceted impact on the Bitcoin asset. Here are the possible effects of this trend:

1. Reduced miner income, affecting the flow of funds in the network

Bitcoin miners' income mainly comes from block subsidies and transaction fees. With the halving of Bitcoin block rewards (the next one is expected to occur in 2024), miners' income will gradually decrease. This means that miners have less Bitcoin to transfer, resulting in a decline in their share of Bitcoin transaction volume. From the on-chain data, miners' share of transaction volume has fallen below 5% and has not reached the lows during the 2021 bull market. This shows that miners have less motivation and ability to sell Bitcoin in the market.

2. Reduced selling pressure

The decline in miners' share of transaction volume may also mean less selling pressure in the market. Since miners are no longer selling Bitcoin frequently, this may slow the market's selling trend and may reduce downward pressure on the market. If miners are no longer in a rush to cash out, market sentiment may become more stable, especially when market prices are volatile.

3. Balance between network activity and miner share

The decline in miner transaction volume share may also be related to the increase in network activity. As more users and transactions participate in the Bitcoin network, miners' share of the overall transaction volume will naturally decrease. This phenomenon is particularly significant in bull markets, because capital inflows into the market tend to drive an increase in transaction volume, thereby diluting miners' transaction share in the network.

4. Long-term sustainability of miners

The reduction in miners' income may lead to the exit of some small miners, especially when mining costs are high and Bitcoin prices are low. This may affect the overall computing power of the Bitcoin network, and in turn affect the security and decentralization of the network. If the exit of miners accelerates, it may cause fluctuations in the computing power of the Bitcoin network and bring certain uncertainties.

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