- Bitcoin transaction fees have surged to their highest level in nearly two years due to increased activity around crypto collectibles called ordinals, providing a windfall for bitcoin miners.
- With the surge in fees, bitcoin miners are estimated to have earned 50% more revenue in December compared to the previous month. This has boosted the share prices of publicly listed mining companies.
- While the current elevated fee levels may be short-lived, analysts expect miners will continue earning higher transaction fees in 2023 as activity increases on the bitcoin network, supplementing their income from block rewards.
Share prices of publicly listed Bitcoin mining companies are “on fire” thanks to high transaction fees, one analyst said. Bitcoin transaction fees have jumped to their highest level in nearly two years, giving miners a windfall profit as they validate transactions on the network.
Why Fees Have Surged
The surge in fees comes amid a flurry of activity around the launch of ordinals, crypto collectibles similar to NFTs. The demand to buy ordinals and the bidding wars around them have clogged the Bitcoin network, pushing up average transaction fees. At the end of December, bitcoin transaction fees reached an average of $2.46, the highest since February 2021.
Impact on Miners
With the surge in fees, miners are estimated to have made 50% more in December than they did the month before. Publicly listed mining companies such as Hut 8, Hive Blockchain, Bitfarms, and Marathon Digital have all seen their share prices jump in recent weeks, with stock gains outpacing bitcoin’s own price appreciation. The influx of transaction fee revenue provides a cushion for miners against declining block rewards.
Outlook Going Forward
It remains to be seen if elevated fees will persist in 2023. December’s surge was tied to a specific event that sparked demand. But analysts say that even after the ordinals effect fades, miners can expect to earn higher fees than before as more activity comes onto the Bitcoin network. Other factors such as the climate could also impact mining economics in 2023.
Conclusion
While volatile, transaction fees represent an underappreciated source of revenue for Bitcoin miners. The past month showed that even short-lived spikes in network usage can be quite lucrative. This helps supplement the Bitcoin rewards that miners receive for validating transactions and provides an extra buffer during periods when mining economics are under pressure.
