Glassnode Weekly: Ether miners’ transaction fee revenue hits one-year low as on-chain activity falls back to lowest level in twelve months

The bitcoin market continues to show relative weakness in terms of price and on-chain activity, with ethereum miners’ transaction fee revenue hitting a one-year low.

The bitcoin market continues to show relative weakness in terms of price and on-chain activity, according to a new report from Glassnode. Ether miner transaction fee revenue is at a one-year low, with average daily transaction fee revenue dropping to just 1,900 ETH/day from over 15,000 ETH/day in early May.

Glassnode Weekly: Ether miners' transaction fee revenue hits one-year low as on-chain activity falls back to lowest level in twelve months

Overall on-chain activity for Bitcoin and Ether is very low, with demand for block space falling to its lowest level in 2020.

At the same time, the Chinese mining market is changing dramatically as several regions impose bans on the industry. This report will explore the impact of changes in hash counting power and miner spending behavior on the chain.

On-chain activity in both Bitcoin and Ether has experienced a significant slowdown, with active addresses and total transfers falling back to levels seen in 2020 and early 2021. Bitcoin active addresses declined 24% from a peak of 1.16 million in March to early May.

Glassnode Weekly: Ether miners' transaction fee revenue hits one-year low as on-chain activity falls back to lowest level in twelve months

For Ether, the decline in active addresses has been even greater, dropping 30% from a brief peak of about 676k. It is now down to 474k per day, last seen in the first quarter of 2021.

Glassnode Weekly: Ether miners' transaction fee revenue hits one-year low as on-chain activity falls back to lowest level in twelve months

The report writes that for the value of dollars settled on the network, the decline in transaction volume has been even more dramatic. Compared to recent highs set in May, the dollar value of Bitcoin (adjusted for changes) and Ether (ETH transfers) are down 63 percent and 68 percent, respectively.

Bitcoin settles about $18.3 billion per day, while Ether settles $5 billion per day in ETH transfers, both on par with the first quarter of 2021.

Glassnode Weekly: Ether miners' transaction fee revenue hits one-year low as on-chain activity falls back to lowest level in twelve months

With network congestion almost completely cleared, transaction fees for priority inclusion in the next block have dropped significantly. Bitcoin transaction fees have fallen to just under 30 BTC/day (~$1.2 million), in line with levels seen in late 2019 and early 2020. This currently represents approximately 4% of miners’ revenue, with block subsidies accounting for the remaining 96%.

Glassnode Weekly: Ether miners' transaction fee revenue hits one-year low as on-chain activity falls back to lowest level in twelve months

For Ether, daily transaction fee revenue has dropped from over 15,000 ETH/day in early May to just 1,900 ETH/day ($4.34 million). This suggests that about 10% of miners’ total revenue comes from transaction fees.

Glassnode writes: “We would have to go back to June 2020, just before the ‘DeFi summer’, to see this level of transaction fees.”

Glassnode Weekly: Ether miners' transaction fee revenue hits one-year low as on-chain activity falls back to lowest level in twelve months

From a macro perspective, the balance of supply held by long-term (blue) and short-term (red) holders bears significant resemblance to the 2017 macro peak. The charts below show the relative supply held by each group and whether they are profitable (dark) or losing money (light).

After reaching the “Peak HODL” (maximum long-term supply), there was a macro distribution in both cycles, with bitcoin wealth shifting from long-term to short-term holders.

Glassnode Weekly: Ether miners' transaction fee revenue hits one-year low as on-chain activity falls back to lowest level in twelve months

The report writes that if we survey total spending behavior over the past year, we see that the percentage of tokens held for shorter periods of time (< 1 year) continues to increase as a percentage of the transaction stream. In the past few months, we have seen younger tokens account for more than 45% of the total transaction volume.

Glassnode Weekly: Ether miners' transaction fee revenue hits one-year low as on-chain activity falls back to lowest level in twelve months

This indicator suggests that most of the current on-chain activity is due to buyer loss selling over the past 6 months.

Conversely, older tokens (more than 1 year old) have reduced spending, with a significant decline following the May sell-off. This suggests that.

1) On-chain settlement demand is extremely low (generally bearish).

2) Long-term investors are not bidding at these prices (neutral to bullish).

Glassnode Weekly: Ether miners' transaction fee revenue hits one-year low as on-chain activity falls back to lowest level in twelve months

The report also suggests that the largest migration of bitcoin hash power in history appears to be underway. Many miners are shutting down or moving their hash power outside of China after mining activity was officially banned in several Chinese provinces.

Over the past two weeks, the estimated average hash rate (7DMA) has dropped by about 16%, from ~155 EH/s to ~125 EH/s. Hash power has now returned to mid-2020 levels.

Glassnode Weekly: Ether miners' transaction fee revenue hits one-year low as on-chain activity falls back to lowest level in twelve months

As the Chinese mining industry begins to deal with the logistical challenges of relocating, relocating or selling hardware and facilities, some may liquidate some of their accumulated bitcoin wealth. These token sales may represent a hedge against risk for miners, access to funds to facilitate and fund logistics, and for some miners, a possible exit from the industry altogether.

Glassnode Weekly: Ether miners' transaction fee revenue hits one-year low as on-chain activity falls back to lowest level in twelve months

During the May sell-off and the past two weeks, Glassnode observed a net inflow of 3,000 to 3,500 BTC. However, buyers have absorbed almost all of the inflows in just a few weeks. Overall, bitcoin holdings on OTC trading platforms have been relatively flat since April.

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/glassnode-weekly-ether-miners-transaction-fee-revenue-hits-one-year-low-as-on-chain-activity-falls-back-to-lowest-level-in-twelve-months/
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