- Bitcoin transaction fees dropped to $38.69 on July 7, the lowest since 2020.
- Despite low fees, Bitcoin miners maintained profitability due to decreased network difficulty.
- Signs of miner capitulation appear as operational costs outweigh profits in a challenging market.
Bitcoin transaction fees have significantly decreased, reaching a four-year low on July 7, 2024. This decline brought the average cost of processing transactions on the Bitcoin network down to $38.69, a fee level not observed since the peak of the pandemic in 2020.
On that day, the Bitcoin trading price hovered above $58,200. Analysts attribute the reduced transaction fees to a dip in the demand for block space and the overall data volume processed. Bitcoin miners, who are essential to processing transactions and maintaining the network, did not see their profitability vanish despite the lower fees. They benefited from a decrease in network difficulty, which requires less computational power to process transactions. According to Ycharts, miners processed a total of 673,752 transactions on July 7. The majority, 89.7%, were Bitcoin transactions, while other protocols like Ordinals, BRC-20, and Runes accounted for the remainder.
Challenges in the Mining Sector
However, the broader context for miners is not entirely positive. The mining sector faces pressures from a post-halving increase in operational costs and a declining Bitcoin price, which recently approached the $50,000 mark. CryptoQuant, a market intelligence firm, reported signs of miner capitulation, where miners reduce operational expenses or sell part of their Bitcoin holdings to stay financially viable.
This so-called capitulation mirrors a trend seen in December 2022, after the collapse of the FTX exchange, marked by a 7.7% drop in Bitcoin’s hashrate. Such reductions are often viewed as indicators of potential market bottoms, suggesting a stabilization phase may be forthcoming.
Despite these operational adjustments, miner revenues have fallen by 63% since the halving event, highlighting the tough economic realities facing those who keep the Bitcoin network running. CryptoQuant noted that for much of the period since the halving, miners have been “extremely underpaid,” as shown by their profit/loss sustainability indicators.
