After falling as low as $6.8 million in the months following Bitcoin’s halving event on May 11, 2020, miner revenue from block rewards is now hovering above $40 million, according to data from blockchain analytics firm Glassnode.
Bitcoin mining is a highly competitive process of creating new cryptocurrencies by solving complex mathematical puzzles with the help of computers with specialized software installed. By verifying Bitcoin transactions and adding them onto the blockchain, miners earn rewards that consist of transaction fees and a base reward for each block they mine.
The block reward, also known as coinbase reward or subsidy, is halved after every 210,000 blocks mined, or approximately every four years–hence the expression “the halving.”
Each halving event reduces the rate of creating new Bitcoin until no more new coins enter the network’s supply at all in the year 2140.
This represents a roughly 488% increase since the last halving. The current values are, however, still lower from the $60 million peak Bitcoin miners enjoyed in May this year immediately before China’s massive crackdown on the mining industry.
This is also 185% higher than values recorded in the period preceding the 2020 halving when miners were paid between $14 million per day.
Bitcoin network recovers
Though miners have to work twice as hard to enjoy the same pre-halving rewards, the rise in miners’ revenue outlined above suggests that there’s a silver lining.
To continue keeping pace financially, mining outfits need to invest in more machines as the block reward decreases. Doing so, however, means spending more money as well as believing that the long-term future of the business is viable.
Following this thinking, the increased revenue suggests that mining businesses are investing in expansion and remain confident in mining. This conclusion is also surprising given the aggressive crackdown on the mining industry in China this year.
In mid-June, after several Chinese provinces in China expelled Bitcoin mining operators, the country’s Central Bank ordered banks and payment platforms to cut off any relationships with cryptocurrency service providers.
All of this, in turn, resulted in miners’ mass exodus out of China, with many of them relocating their operations to North America or Kazakhstan. It also led to the collapse of both Bitcoin’s hash rate–the total computing power of the network–and mining difficulty.
Mining difficulty–a measure designed to calculate how much computational power is required to produce new Bitcoin–peaked above 25 trillion in mid-May. Mining difficulty is measured using a relative unit that stood at “1” when Bitcoin’s genesis block was mined on January 3, 2009.
Soon after the Chinese crackdown, this difficulty has fallen by as much as 54%, making it roughly twice as easy to find new blocks.
The value has been steadily recovering since then though, with five consecutive increases bringing the difficulty to almost 19 trillion. The next difficulty adjustment, which is set to happen within the next 8 hours, is expected to result in yet another increase of about 3%, according to BTC.com.
Glassnode co-founders Jan Happel and Yann Allemann said that the current Bitcoin difficulty chart “is soon to signal a positive recovery as more miners come back online.”
“The last comparable event was following bear market capitulation in Dec 2018, which took 164-days to flip positive. The current mining recovery has taken 120-days,” they wrote.
#Bitcoin difficulty ribbon is soon to signal a positive recovery as more miners come back online.
The last comparable event was following bear market capitulation in Dec 2018, which took 164-days to flip positive.
The current mining recovery has taken 120-days. pic.twitter.com/l2Nmc9RYTR
— Jan & Yann (@Negentropic_) October 4, 2021
With the price of the world’s leading cryptocurrency currently eyeing a recovery to $50,000, and the network’s hash rate returning to the values last seen in June, miners now indeed appear to be more confident and more willing to turn on more machines to get their rewards.
