Bitcoin experiencing ‘DeFi summer’ moment as miners rake in record $100 million post-halving: Bernstein

This is what analysts from research and stock exchange company Bernstein say Bitcoin BTC

+0.89%
is having a “DeFi summer” moment as the new Runes token standard helps generate record daily miner rewards and transaction fees.

“Bitcoin is no longer a ‘plain vanilla’ blockchain, where nothing happens other than holders of simply ‘HODL’ BTC,” Gautam Chhugani and Mahika Sapra wrote in a note to their clients on Monday. “Bitcoin is experiencing a ‘Defi Summer’-like moment that Ethereum did in 2020, when multiple decentralized apps and tokens launched on the Ethereum blockchain, leading to a glut of liquidity and transaction fees.”

Bitcoin’s fourth halving occurred around 0:09 a.m. UTC on April 20 (8:09 p.m. ET on April 19), reducing block grant rewards for miners from 6.25 BTC to 3.125 BTC.

Bitcoin miners had earned a total of about $60 to $70 million in daily subsidies and transaction fees leading up to the halving. However, according to Blockchain.com, this rose to $107.75 million on April 20, despite miners earning half the subsidy reward per block. facts. About 75% of this ($80 million) came from transaction fees alone, per Glassnode facts – both record highs.

The daily earnings of miners. Image: Blockchain.com.

Transaction fees exceed subsidy rewards for more than 100 blocks

After block 840,000 was halved and generated $2.4 million in fees – far more than the estimated $200,000 in block subsidy rewards – bitcoin went on a record streak of 104 blocks transaction fee rewards exceeding the subsidy, according to Bitcoin Explorer. Mempool.

“Bitcoin has hit a record high of 100 blocks of transaction fees exceeding the block subsidy. Great to see how the experiment plays out and proves the theory that fees can support the thermodynamic security budget!”, Jameson Lopp, co-founder of Casa, said.

Bitcoin mining rewards. Image: Bernstein.

In fact, aside from an apparently accidental $3 million overpayment last November, all of Bitcoin’s ten most valuable blocks have been mined since the halving.

The Runes hype ensures an increase in activity

Much of the transaction fees can be attributed to the hype surrounding Runes – a new fungible token standard for Bitcoin that was launched at the halving. “This is driven by speculative activity to mint new tokens (mostly meme tokens) by retail traders,” the Bernstein analysts said.

Developed by Ordinals creator Casey Rodarmor, the Runes Protocol provides a more efficient solution for “etching” (creating) tokens on Bitcoin compared to BRC-20 tokens that use Ordinals inscriptions.

“The Bitcoin blockchain is seeing developer activity and the launch of new token protocols, attracting retail traders to new tokens, leading to a splurge of ‘fees’ on the Bitcoin network,” Chhugani and Sapra explained. “The process of minting the token requires the user/merchant to pay fees to record their transaction in the Bitcoin block space, and the excessive demand for minting tokens leads to more competition and thus an escalation of the Bitcoin -transaction costs.”

According to Runes explorer Unisat, it’s over 7,000 Until now, runic tokens have been minted, of which “SATOSHI•NAKAMOTO” is the most preserved.

Transaction costs drop as the Runes hype subsides

Despite the initial hype, average transaction fees dropped significantly from an all-time high of $128.45 on halving day to $34.80 on April 21, according to YCharts. factswith total daily income from miners falling to approx $51 million. According to Mempool, the average cost has now dropped back to around $10 facts.

Bernstein’s analysts cautioned that investors should not extrapolate higher fees into the future, but pointed to the untapped market potential of fungible tokens on Bitcoin. “DeFi tokens and other utility tokens on Ethereum exceed $200 billion in value (versus a negligible market cap on Bitcoin now),” Chhugani and Sapra said. “While Runes launched with meme tokens, we could see more utility-based fungible tokens on Bitcoin over time.”

In terms of the future impact on miners, “we expect 15% of miner revenues to be network transaction fees, on a sustainable basis,” the analysts added. “However, speculative interest in blockchains could last six to 18 months, so we wouldn’t be surprised if miners continue to enjoy a larger-than-normal windfall for the time being.”

Bitcoin mining stocks are rising while the hash rate remains stable

“Miners were in an official bear market before the Bitcoin halving,” the analysts said. “This is because BTC rewards for miners are cut by half every four years. So investors are not feeling good about the pre-halving of mining stocks, which is reflected in the deep underperformance of Bitcoin miners versus Bitcoin year-to-date.”

However, public Bitcoin mining stocks rallied ahead of Friday’s halving frenzy of activity, with Riot Platforms and Marathon Digital closing up about 10% and rival CleanSpark gaining 6% on the day.

The total hash rate of Bitcoin miners has also remained stable at around 620 EH/s after the halving. “This is not surprising given the healthy bitcoin dollar price above $64,000 and the abnormal windfall on network transaction fees,” Chhugani and Sapra said. “We expect hash rates to fall only if bitcoin price action turns weak from here on out and hits new local lows with weaker ETF flows. We believe this scenario appears unlikely and that miners will continue to maintain their capabilities after the halving.”

Bitcoin is currently trading at $66,106, according to The Block’s price page – up 1.8% in the last 24 hours.