BT Daily News: Crypto Market Turmoil: Is A Bitcoin Miner Dump Incoming?
1. Crypto Market Turmoil: Is A Bitcoin Miner Dump Incoming?
A recent post by Altcoin Buzz on Twitter has raised concerns about a potential incoming dump by Bitcoin miners, as transaction fees and mempool backlog reach new heights.This development has sparked debate within the cryptocurrency community, with some arguing that this may negatively impact individual transactions and the price of Bitcoin, which has been tumbling recently. But others see it as a positive development for mining revenue and economic incentives.
Skyrocketing Transaction Fees and Mempool Backlog
Bitcoin’s mempool currently has over 300k transactions awaiting confirmation, and transaction fees have surged to levels not seen since 2017. High-priority transactions now command a rate of 654 sat/vB or around $30. In a recent incident, transaction fees within a single block surpassed the block rewards given to miners, with fees totaling 6.7 BTC compared to the block subsidy of 6.25 BTC.
Mining Activity Boosted by Rising Fees
These elevated transaction fees primarily benefit miners, as noted by Bitcoin trader Toma B. Miners are reaping significant rewards from the higher fees, even amidst claims of an “attack” on Bitcoin.
The surge in fees and transaction backlog is attributed to the increased use of the Taproot update for embedding NFTs and the growing popularity of BRC-20 tokens, which were introduced as an experiment in March.
A Mixed Bag for Investors and Miners
While the rising fees and backlog may be detrimental to those who wish to make regular transactions, like traders, they present a valuable opportunity for miners to enjoy increased revenue and economic incentives. As a result, some observers believe that this could be an ideal moment for miners to take profits.
In any case, whether this ultimately leads to an incoming dump by miners remains to be seen, but it is clear that the market dynamics are shifting, and investors should be prepared for any eventuality.
2. Why Is the Crypto Market Up Today?
The Total Crypto Market Cap (TOTALCAP) and the Bitcoin (BTC) price both bounced after previous breakdowns and have increased since May 12. The Conflux (CFX) price is trading inside a bullish pattern.In the news, the OpenAI CEO Sam Altman is in talks to raise $100 million for his crypto venture Worldcoin.
Crypto Market Cap (TOTALCAP) Initiates Bounce
The TOTALCAP has fallen inside a descending parallel channel since April 14. The descending parallel channel is considered a bullish pattern, meaning that it leads to breakouts most of the time.
On May 12, TOTALCAP bounced at the channel’s support line (green icon) and began the current upward movement.
TOTALCAP currently trades in the middle of the channel (red circle). If it gets rejected, a drop to the channel’s support line could ensue. On the other hand, if it reclaims this level, an eventual breakout will be likely.
Bitcoin (BTC) Price Retests Breakdown Level
The Bitcoin price has traded inside a head-and-shoulders pattern since March 17. The head and shoulders is considered a bearish pattern, meaning that it leads to breakdowns most of the time.
On May 11, the BTC price broke down reaching a low of $25,811 the next day. A move that travels the entire height (white) of the pattern would lead to a low of $23,300.
However, the BTC price regained its footing and is now retesting the breakdown level.
If it gets rejected, a drop to $23,300 is expected. However, if the price reclaims the $27,500 level, it could increase toward its previous highs at $31,000.
Conflux (CFX) Price Trades in Bullish Pattern
Similarly to the TOTALCAP, the Conflux (CFX) price has fallen inside a descending parallel channel since March 10. These channels usually contain corrective movements, meaning that a breakout from it is expected.
On May 13, the price bounced at the channels support line (green icon) and began the current upward movement.
If the price moves above the channel’s midline, an increase toward its resistance line at $0.38 will be expected. However, if it breaks down instead, the CFX price could fall to $0.14.
3. Deciphering the link between Bitcoin’s [BTC] block sizes and miner fees
In recent days, the rise of Ordinals inscriptions and BRC-20 showed a significant impact on the Bitcoin’s [BTC] network, even down to its block size. The latest data revealed that the block size has increased and could grow further. This begs the question: what implications does this have for the network’s miners?Bitcoin block size projections
Glassnode’s data indicated a notable surge in the size of the Bitcoin blockchain, growth of approximately 24GB. This expansion can be attributed to the increasing popularity of Ordinals inscriptions, which require more block space on the network.
As of this writing, the blockchain’s size stood at 479.9 GB. However, the duration of this inscription trend remains uncertain, though there are projections concerning the potential future size of the blockchain.
These projections hinge on whether a full 4MB, 2.5MB, or 1.35MB will be consistently added to the blockchain. Regardless of the specific projection, a larger block size raises concerns for the miners operating within the network.
Some effects of increased block size on Bitcoin mining
Miners play a crucial role in the Bitcoin network, but the growing size of the blockchain presents several challenges for them.
Firstly, miners must store a complete copy of the blockchain on their computers. As the blockchain expands, it demands more storage space, which can pose difficulties for miners with limited capacity or running on resource-constrained devices.
Moreover, miners rely on transmitting and receiving blocks and transactions across the network. With a larger blockchain, the volume of data that needs to be transmitted increases.
Miners operating with slower internet connections or limited bandwidth may encounter delays in downloading and propagating blocks, potentially impacting their participation efficiency.
Additionally, when a miner receives a new block, they must validate its transactions and ensure their accuracy before adding it to their local copy of the blockchain.
As the blockchain grows in size, the validation process naturally takes longer due to the increased volume of data to be verified.
This prolonged validation period can affect the speed at which miners confirm transactions and add new blocks to the blockchain, potentially influencing the overall network efficiency.
Current state of miners fees and difficulty
Recently, the Bitcoin network experienced significant growth, leading to a notable surge in mining fees for network participants.
The value of mining fees reached historic levels, representing a remarkable milestone. According to data provided by Glassnode, the mining revenue spiked to approximately 25.59%.
The current level marked the third-highest mining fee since the inception of Bitcoin. The two previous instances where the mining fee reached higher levels were observed in 2017, peaking at 35.07% and 25.8%, respectively.
Furthermore, Bitcoin’s mining difficulty had a noticeable upward trend. Particularly since the beginning of this year, the mining difficulty has consistently reached new all-time highs.
Several techniques and optimizations have been proposed and implemented within the Bitcoin network to address the growing blockchain size.
One notable development is the Lightning Network, which strives to alleviate the transactional load on the main blockchain. Also, considering the current state of the Bitcoin network, there is a potential for the emergence of other L2 solutions.