Original author: CryptoVizArt, UkuriaOC, Glassnode
Compiled by: Lawrence, Mars Finance
summary
Hash rate (computing power) is still slightly below all-time highs, and despite declining revenue, miners’ continued investment shows tremendous confidence in the Bitcoin network.
Investor interaction with exchanges is decreasing, and the overall shrinkage in trading volume indicates waning investor and trading interest.
Both Bitcoin and Ethereum ETFs have experienced outflows, however, investor interest in Bitcoin ETFs remains significantly greater in size and volume.
miner
Miners remain fundamental participants in the Bitcoin network and are the primary source of production of new coins. Miners provide the hashing power used to discover the next valid block, and the network automatically rewards them with newly minted coins and transaction fees.
This makes Bitcoin mining an extremely challenging industry because they have no control over either the input cost of energy or the output cost of BTC.
Despite volatile and uncertain market conditions, Bitcoin miners have continued to install new ASIC hardware, pushing the overall hash rate (14D-MA) up to 666.4EH/s, just 1% lower than ATH.
As the hash rate increases, the target difficulty of successfully mining a valid block also increases. The Bitcoin protocol automatically adjusts difficulty to accommodate rising and falling hash rates on the network.
Currently, the average hash required to mine a block is 338k exahash. This is the second-highest difficulty in Bitcoin history, highlighting the increasing competition in the mining industry.
However, since market prices hit new highs in March, miner revenue has dropped significantly. A large portion of the revenue decline can be attributed to lower expense pressure. This is due to lower demand for currency transfers and lower fees generated from rune and inscription related transactions.
With spot prices above $55,000, miner revenue associated with block subsidies remains relatively high, but still around 22% below previous highs.
Block subsidy revenue: $824 million
Transaction fee revenue: $20 million
As the hash rate increases, the target difficulty of successfully mining a valid block also increases. The Bitcoin protocol automatically adjusts difficulty to accommodate rising and falling hash rates on the network.
Currently, the average hash required to mine a block is 338k exahash. This is the second-highest difficulty in Bitcoin history, highlighting the increasing competition in the mining industry.
However, since market prices hit new highs in March, miner revenue has dropped significantly. A large portion of the revenue decline can be attributed to lower expense pressure. This is due to lower demand for currency transfers and lower fees generated from rune and inscription related transactions.
With spot prices above $55,000, miner revenue associated with block subsidies remains relatively high, but still around 22% below previous highs.
Block subsidy revenue: $824 million
Transaction fee revenue: $20 million
As revenue declines, we can infer that some degree of revenue pressure may begin to emerge. We can estimate the percentage of mining supply spent by miners over a 30-day period to measure whether this is the case.
Due to the competitive and capital-intensive nature of the mining industry, miners have historically been required to allocate a large portion of the coins mined to cover input costs. Interestingly, miners have gone from net distribution of mined coins to now keeping a portion of mined coins in their vault reserves.
This highlights an interesting development, as miners tend to be procyclical, being sellers during dips and holders during upturns. Rising hash rates and difficulty mean that BTC is becoming increasingly more expensive to produce, which may adversely affect miner profitability in the near future.
Settlement slows down
The volume of transactions settled on-chain can also reflect the adoption and health of the network. When filtering through entity-adjusted trading volumes, the network currently processes and settles approximately $6.2 billion in daily trading volume.
However, settlement volumes began to fall back to annual average levels, showing a significant decline in network usage and throughput. Overall, this is a net negative observation.
Decline in willingness to trade
In an ever-changing market landscape, centralized exchanges have always been a central venue for speculation and price discovery. Therefore, we can evaluate the on-chain trading volume of these venues as an indicator of investor activity and speculative interest.
Performing a similar 30-day/365-day momentum crossover on exchange-related inflows and outflows, we can see that the average monthly volume is well below the annual average volume. This highlights the decline in investor demand and the reduction in speculator trading in the current price range.
Next, we’ll look at the exchange’s spot trading volume. Here we apply a 90d MinMax scalar that normalizes the value set in the range 1 to -1 relative to the maximum and minimum values of the selected period.
It can be seen that spot volume momentum continues to weaken, similar to previous observations. This further supports the view that trade activity fell significantly last quarter.
The CVD indicator estimates the current net balance between buying and selling pressure in the spot market. Using the same methodology, we note that selling pressure from investors has been increasing over the last 90 days, causing the price action to be sloping downwards.
Finally, we can assess Bitcoin price momentum. Here we can see a degree of indecision, with both positive and negative data points occurring in August. This contrasts with the two previously highlighted indicators, both of which were significantly negative during the same period.
Combining the MinMax transformations of volume, CVD and price action respectively, we are able to produce a sentiment heatmap with respect to eigenvalues between 1 and -1. We can think of this on the following framework:
A value of 1 indicates higher risk
0 means medium risk
-1 means lower risk
All three indicators suggest that the market is moving into a low-risk zone relative to the past 90 days of data points. This convergence between the spot indicators discussed can translate into decreasing (spot volume momentum) selling volume (CVD < 0) while price action is slowly declining. This structure can be susceptible to external forces and can explode on either side if conditions change.
ETF
The Ethereum ETF has now followed the launch of the US Bitcoin ETF in August. These two events mark a “Rubicon crossing” for the digital asset ecosystem, providing traditional U.S. markets with easy access to the two leading cryptocurrencies.
Starting with the Bitcoin ETF, we can see that net capital flows in USD have weakened since August 2024, with weekly outflows now standing at $107 million.
Demand for Ethereum ETFs has been relatively subdued recently, with net negative outflows. This was primarily due to redemptions from Grayscale's ETHE product, which was not offset by inflow demand from other instruments.
Overall, the Ethereum ETF saw total outflows of $13.1 million. This highlights the difference in demand scale between BTC and ETH, at least under current market conditions.
To approximate the impact of ETFs on the Bitcoin and Ethereum markets, we have normalized the ETF net flow deviation by the corresponding spot trading volume. This ratio allows us to directly compare the relative weightings of ETFs in each market.
As shown in the chart below, the relative impact of ETFs on the Ethereum market is equivalent to ±1% of spot trading volume, while for Bitcoin ETFs it is ±8%. This shows that despite the normalization of Bitcoin ETFs, interest in Bitcoin ETFs is still an order of magnitude greater than Ethereum ETFs.
Summarize
Miners continue to show great confidence in the Bitcoin network, with hash rates still slightly below all-time highs despite a significant drop in revenue. However, since miners tend to be procyclical, being sellers during dips and holders during upswings, you can expect some degree of pressure on sellers if there is further decline.
At the same time, investor interaction with exchanges continues to decline, and trading volume has shrunk across the board, indicating a weakening of investor and trading interest. This was also evident among institutional investors, with both Bitcoin and Ethereum ETFs seeing net outflows.
(The above content is excerpted and reprinted with permission from partner MarsBit, original text link)
Statement: The article only represents the author's personal views and opinions, and does not represent the objective views and positions of the blockchain. All contents and opinions are for reference only and do not constitute investment advice. Investors should make their own decisions and transactions, and the author and Blockchain Client will not be held responsible for any direct or indirect losses caused by investors' transactions.
〈Glassnode Report: Bitcoin miners’ confidence is strong but revenue declines, ETF fund outflows reveal market cooling〉 This article was first published in "Blocker".
