Bitcoin Miners Struggle Post-Halving as Reserves Plunge – The Defiant

Bitcoin miners are feeling the pinch as their reserves have plummeted since the April Bitcoin halving.

Data shows a steady decline in miner reserves, hitting lows not seen in years. According to on-chain analytics platform CryptoQuant, reserves fell to 1.80 million BTC from 1.84 million BTC a year ago, the lowest since July 2021. The 2.17% annual decline is the biggest in over a decade, marking the first significant drop since 2011​.

This drop suggests miners are selling more Bitcoin to cover operational costs, likely due to reduced block rewards following the halving.

“Rising electricity expenses, hardware upgrades, and some miners diversifying their investments into emerging technologies like artificial intelligence contributed to the plunge in miner reserves,” Kashif Raza, CEO of Bitinning, told The Defiant.

Bitcoin halving is an event that typically takes place every four years, intending to decrease the rate at which new Bitcoins are created by reducing the block reward miners receive for adding a new block to the Bitcoin blockchain. Following the latest halving, miners now receive 3.125 BTC for every block issued, from 6.25 previously.

“With reduced rewards, only the most efficient mining operations can remain profitable. Increased competition leads to higher operational costs and thinner profit margins for miners,” said Raza.

It’s not just miner reserves that are affected. New Bitcoin addresses, miner revenue, transaction fees, and even Bitcoin on-chain volumes have also plunged as side effects of the halving.

New Bitcoin Addresses Slide

The number of new Bitcoin addresses created each day has dropped to its lowest level since 2019.

On June 3, the figure plummeted to 265,000 — down from a previous low of 352,000 in 2019, marking a decrease of 24%. On the day of the halving, the number of daily new wallet addresses stood at 377,000.

Rising new addresses usually indicate fresh investor interest, suggesting optimism and potential growth in the network. Conversely, a low number of new wallets may signal reduced investor interest and lower network activity.

Data from blockchain.com indicates that the halving event notably impacted miners’ revenue. It dropped from $107 million to $36 million, representing a decrease of approximately 70%.

On-Chain Volume Declines

Transaction fees on the Bitcoin network have fallen sharply too. In June, the average transaction fees (7-day moving average) have dropped to $3.70 from $4.13 a year ago. Although the launch of Runes and the post-halving period initially saw fees spike to $40 in April, they have stabilized subsequently.

Lower fees generally indicate reduced network congestion and fewer transactions, which could be due to decreased user activity.

The adjusted on-chain volume, which measures the total value transferred on the Bitcoin blockchain, has also seen a notable decrease. It dropped to $50 billion on June 2 from a peak of $83 billion on March 14. 

According to Santiment, Bitcoin’s on-chain activity is nearing historic lows as traders have reduced transactions in the two months following its all-time high.

“This isn’t necessarily a sign of more BTC dips, but rather a signal of crowd fear and indecision,” the on-chain analytics platform tweeted.

Shift to AI

To mitigate these challenges, some Bitcoin miners are turning to artificial intelligence (AI) as a means to diversify and boost their revenue streams. Bitcoin miners use powerful GPUs, which can also be used to support AI computation.

On June 3, Core Scientific announced on X a $3.5 billion agreement with AI cloud provider CoreWeave. Through this contract, Core Scientific will supply an additional 200 megawatts (MW) of infrastructure to support CoreWeave’s high-performance computing (HPC) operations.

Hut 8 also reported a substantial move in this direction. Hut 8 made its first purchase of 1,000 Nvidia GPUs and secured a customer agreement with an AI cloud platform.

Meanwhile, Bit Digital said it has 251 servers actively generating revenue from AI operations, earning around $4.1 million in April alone.