Rena Shah

Bitcoin price predictions are always absolutely everywhere. Everyone who pays attention to crypto, whether for investing, building or entertainment, cannot avoid reading daily wild headlines about where the price of BTC is heading.



“The Fed May Have Just Triggered a $100 Billion Bitcoin Price Boom as Ethereum Surges Back,” “Bitcoin Price Drops Below $28,000 Post Labor Day – Rough Road Ahead,” and “Bitcoin at $100,000? Insiders Say the Cryptocurrency Could Test New Highs This Year,” are some of my recent favorites.



From $1,000,000 price bets to the proverbial “imminent crash,” those who have been around long enough in this space have either learned to tune predictions out or play into their hyped narrative themselves.&nbsp;



With the <a href="https://blockworks.co/news/bitcoin-litecoin-halvings" target="_blank" rel="noreferrer noopener">next bitcoin halving event</a> less than a year away, it’s a given that prices will move, maybe even wildly. So it’s time we stop predicting the price of bitcoin like it’s something interesting, useful, or even, frankly, predictable at all.&nbsp;



Instead, there’s an argument to be made that a new challenger to the bitcoin price prediction has entered the room — a contender for new predictions that could actually bring some useful insight to the community.



The challenger? Bitcoin transaction fees.



If we were able to provide more insight about bitcoin transaction fees, our predictions could actually be useful instead of hollow headline grabbers&nbsp;— we could help users find the lowest fee moments to dive into new use cases on Bitcoin, or help builders develop and scale Bitcoin layers more efficiently.



<h2 class="wp-block-heading">Bitcoin was meant to scale</h2>



<a href="https://trends.google.com/trends/explore?date=today%205-y&amp;q=bitcoin%20transaction%20fee">Interest</a> surrounding all aspects of the Bitcoin blockchain has hit record levels, as <a href="https://blockworks.co/tag/ordinals" target="_blank" rel="noreferrer noopener">Ordinals</a>, Stamps, BRC-20 tokens and other new protocols have sprouted up this year. Bitcoin’s average daily transactions over seven days reached <a href="https://blockworks.co/news/bitcoin-transactions-record-ordinals" target="_blank" rel="noreferrer noopener">record highs</a>, the first time it’s done so since December 2017. We’re entering this era where people actually want to do something more with Bitcoin than just point out its price.



Glassnode <a href="https://studio.glassnode.com/metrics?a=BTC&amp;m=transactions.Count&amp;mAvg=7&amp;s=1682985600&amp;u=1685505599&amp;zoom=">reported</a> that the average transactions reached 586,704.42 throughout May. The average transaction fee reached as high as <a href="https://blockworks.co/news/binance-bitcoin-withdrawals" target="_blank" rel="noreferrer noopener">seven dollars</a>, as Ordinal inscriptions surpassed three million in May 2023.&nbsp;



The thing we have forgotten is <a href="https://blockworks.co/tag/bitcoin" target="_blank" rel="noreferrer noopener">Bitcoin</a> was always meant to scale. Low fees were always going to be temporary. That’s why Bitcoin layer-2 solutions exist. As is the case with every other major layer-1 blockchain, when the base layer began to bloat, layer-2s were designed to efficiently scale usage and reprioritize where demand went toward the base layer. 



Read More: <a href="https://blockworks.co/news/ron-desantis-bitcoin-politics">Ron DeSantis Posturing On Bitcoin Is Just Performative Politics</a>



The Bitcoin builders community has <a href="https://blockworks.co/podcast/empire/5dbdd774-f8ec-11ed-9fad-4b0caf9e5c8d" target="_blank" rel="noreferrer noopener">talked</a> about the idea of DeFi and other use cases coming back to Bitcoin from other layer-1s for years, and now we are seeing that prediction become a reality. This revival of activity for Bitcoin means that the day-to-day price of transaction fees is going to matter more for many users than the daily moving average cost of one BTC.



I’ll go first with this new prediction model.



I predict that we will see another 10x from here in transaction fees.&nbsp;



As the Bitcoin thesis continues playing out, and as layer-1 apps grow and scale into layer-2s, we will see multiple spikes in the daily transaction price that will worry some and excite others. Ultimately, the higher fees will benefit the entire Bitcoin community.&nbsp;



Now, it’s your turn.



<hr class="wp-block-separator has-alpha-channel-opacity"/>


<div class="wp-block-post-author-biography">Rena Shah is the Head of Operations &amp; Strategy at Trust Machines, a company building the largest ecosystem of applications on Bitcoin. Previously, she was the Head of Exchange at Binance.US, where she grew the exchange from $30M to $3B in daily trading volume within 18 months. Shah is a veteran in the crypto space with previous roles at Ember Fund, a retail-focused app, and with a market maker, Apifiny. Rena spent time on the commodities side with a unique background as a drilling engineer. She spent her early career offshore on drilling rigs while spinning up Bitcoin mining pools. 
</div>


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Stop. Predicting. Bitcoin’s. Price.

Darren Kleine

Bitcoin is seeing a lot of traffic these days. Block sizes, mempool transactions, hash rates and fees — they’re all trending up.&nbsp;



A recent fee spike on the Bitcoin network was — fortunately for users — a brief outlier, apparently caused by a BRC-20 NFT craze that subsided within the span of a few days. Still, transactions and fees continue climbing on the network with <a href="https://blockworks.co/news/defi-on-bitcoin" target="_blank" rel="noreferrer noopener">increased activity</a> that now extends beyond purely trading and storing value.



<figure class="wp-block-image size-large"><img decoding="async" loading="lazy" width="1800" height="1013" src="https://blockworks-co.imgix.net/wp-content/uploads/2023/05/glassnode-studio_bitcoin-mean-block-size-1.png?w=1024&amp;h=1024" alt="" class="wp-image-56422" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2023/05/glassnode-studio_bitcoin-mean-block-size-1.png?w=1800 1800w, https://blockworks-co.imgix.net/wp-content/uploads/2023/05/glassnode-studio_bitcoin-mean-block-size-1.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2023/05/glassnode-studio_bitcoin-mean-block-size-1.png?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2023/05/glassnode-studio_bitcoin-mean-block-size-1.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2023/05/glassnode-studio_bitcoin-mean-block-size-1.png?w=1536 1536w, https://blockworks-co.imgix.net/wp-content/uploads/2023/05/glassnode-studio_bitcoin-mean-block-size-1.png?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2023/05/glassnode-studio_bitcoin-mean-block-size-1.png?w=464 464w, https://blockworks-co.imgix.net/wp-content/uploads/2023/05/glassnode-studio_bitcoin-mean-block-size-1.png?w=389 389w, https://blockworks-co.imgix.net/wp-content/uploads/2023/05/glassnode-studio_bitcoin-mean-block-size-1.png?w=80 80w" sizes="(max-width: 1800px) 100vw, 1800px" /><figcaption class="wp-element-caption">Source: <a href="https://studio.glassnode.com/metrics?a=BTC&amp;category=Network%20Stats&amp;m=blockchain.BlockSizeMean&amp;s=1662073200&amp;u=1684389599&amp;zoom=">Glassnode</a></figcaption></figure>



Increasing block sizes and jumps in <a href="https://www.blockchain.com/explorer/charts/mempool-count">transaction</a> fees appear to be the result of activities that are usually more at home on rival network, <a href="https://blockworks.co/tag/ethereum" target="_blank" rel="noreferrer noopener">Ethereum</a>. Due to its baked-in virtual machine design, utilities like <a href="https://blockworks.co/tag/nft" target="_blank" rel="noreferrer noopener">NFT</a> minting and <a href="https://blockworks.co/tag/defi" target="_blank" rel="noreferrer noopener">DeFi</a> trading are commonplace on Ethereum. The Bitcoin network, on the other hand, only enabled similar capabilities as a sort of add-on through the <a href="https://blockworks.co/news/anticipating-bitcoins-taproot-upgrade-heres-what-you-need-to-know" target="_blank" rel="noreferrer noopener">Taproot upgrade</a> in 2021.



<figure class="wp-block-image size-large"><img decoding="async" loading="lazy" width="1440" height="810" src="https://blockworks-co.imgix.net/wp-content/uploads/2023/05/n-payments-per-block.png?w=1024&amp;h=1024" alt="" class="wp-image-56424" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2023/05/n-payments-per-block.png?w=1440 1440w, https://blockworks-co.imgix.net/wp-content/uploads/2023/05/n-payments-per-block.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2023/05/n-payments-per-block.png?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2023/05/n-payments-per-block.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2023/05/n-payments-per-block.png?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2023/05/n-payments-per-block.png?w=464 464w, https://blockworks-co.imgix.net/wp-content/uploads/2023/05/n-payments-per-block.png?w=389 389w, https://blockworks-co.imgix.net/wp-content/uploads/2023/05/n-payments-per-block.png?w=80 80w" sizes="(max-width: 1440px) 100vw, 1440px" /><figcaption class="wp-element-caption">Source: <a href="https://www.blockchain.com/explorer/charts/n-payments-per-block">Blockchain.com</a></figcaption></figure>



Avi Felman, head of digital asset trading at GoldenTree Asset Management, and Jonah Van Bourg, Cumberland’s global head of trading, spoke to Blockworks on the <a href="https://www.youtube.com/watch?v=q2afnJQjblA">1000x podcast</a> about the pressures of new activities and the potential growth of a development community for the Bitcoin network.



<h2 class="wp-block-heading">Differing economic architectures</h2>



Felman notes that <a href="https://blockworks.co/tag/bitcoin">Bitcoin</a>’s economic architecture is very different from Ethereum’s. Despite activity “going through the roof,” holders of bitcoin see little to no direct benefit, with fees going exclusively to miners. On Ethereum, anyone holding <a href="https://blockworks.co/price/eth">ETH</a> can choose to stake it and participate in the benefits of increased traffic.&nbsp;



When Ethereum experiences an increase in usage, fees are burned, <a href="https://blockworks.co/news/ethereum-deflationary-model" target="_blank" rel="noreferrer noopener">reducing token circulation</a>. The opposite is true with Bitcoin, Felman argues. “You just get a worse dynamic because the more activity that exists on Bitcoin, actually, the more supply of bitcoin is probably gonna hit the market.”



“And it also deteriorates the user experience,” Van Bourg adds, referring to the recent withdrawal suspension of bitcoin on Binance. The largest crypto exchange was <a href="https://blockworks.co/news/binance-bitcoin-withdrawals" target="_blank" rel="noreferrer noopener">forced to pause BTC withdrawals and hike fees</a> to allow the Bitcoin network to catch up on pending transactions.



“Stakeholders of ETH are aligned because they literally are staking it and earning the rewards and processing the blocks, constructing them.”



“The beauty of proof-of-stake,” Felman says, “is that all of those fees that are burned and all the fees that are generated are now paid back to owners of the asset.”



<h2 class="wp-block-heading">Should we be worried?</h2>



While the security of the Bitcoin network is “possibly more robust,” Van Bourg says, its capacity to host more applications exhibits flaws.



Van Bourg asks, “Should we be worried about Bitcoin dominance as a result of the fact that transactions have exploded on Bitcoin, an L1 that isn&#8217;t necessarily built to work like Ethereum and is deteriorating its UX?”



Felman expects a “tech solution” to the problem, with the potential growth of a community of developers on the network. Van Bourg promptly disagrees, noting that “there&#8217;s no community of developers that&#8217;s all in agreement working on Bitcoin the way that there is on ETH.”



“There are Bitcoin core devs, but they&#8217;re split into factions.”



Felman counters, “Ordinals were developed. These BRC-20s were developed.”



<iframe loading="lazy" frameborder="0" height="200" scrolling="no" src="https://playlist.megaphone.fm/?e=BWG3258032408" width="100%"></iframe>







“I think what&#8217;s happening right now is you&#8217;re seeing the origin sparks of an organic development community for Bitcoin.”



Felman agrees that such a community does not yet exist. He expects that the number of people that are “<a href="https://www.blockworksresearch.com/research/stacks-the-difficulties-of-scaling-bitcoin" target="_blank" rel="noreferrer noopener">trying to figure out how to build on Bitcoin</a>,” will double over the next few months “based on this activity,” however.



“People flock to where you can make money at the end of the day. And the reality is that you can now make money building on Bitcoin.”&nbsp;







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Is All This Bitcoin Traffic a Good Thing?

Bessie Liu

The community that governs Uniswap&#8217;s decentralized exchange is once again discussing the possibility of implementing a fee switch.



GFXLabs’ latest proposal is looking to charge liquidity providers a fee equivalent to ⅕ of the pool fees across all Uniswap v3 pools and redistribute the earnings to the UNI community.



Uniswap v3 Polygon will undergo an initial test of the proposal. Depending on its success, the community will be presented with a subsequent proposal to determine whether or not the fee switch should be activated on Ethereum.



Separately, Uniswap community governance must also create a follow-up proposal to determine where to allocate the revenue.&nbsp;



An <a href="https://blockworks.co/news/uniswaps-proposed-fee-switch-would-cut-into-liquidity-provider-payouts" target="_blank" rel="noreferrer noopener">initial</a> fee switch proposal was introduced in July last year by community members Leighton Cusack, founder of DeFi protocol PoolTogether and Guillaume Lambert, the founder of Panoptic.



The proposal suggested that Uniswap should test the parameters of its fees in select liquidity pools: 0.05% of DAI-ETH, 0.3% of ETH-USDT and 1% of USDC-ETH.



Despite passing a <a href="https://snapshot.org/#/uniswap/proposal/0xe9f8e5dd7ec26f7c0e7dd9e19bb8d57497d27d4a74be01cd3cad159cf3901b7f">temperature</a> and <a href="https://snapshot.org/#/uniswap/proposal/0xe9f8e5dd7ec26f7c0e7dd9e19bb8d57497d27d4a74be01cd3cad159cf3901b7f">consensus</a> check on Snapshot, the protocol did not record the proposal on chain. This was due to concerns raised by a handful of community members regarding the lack of clarity surrounding US tax laws and the potential implications of the revenue generated from the fee switch on the DAO.



“Although legislation has been introduced to address the issue, it has not passed Congress or been signed into law,” Devin Walsh, the executive director of Uniswap Foundation said in an earlier <a href="https://gov.uniswap.org/t/fee-switch-pilot-update-vote/19514/49">proposal discussion</a>. “Following a holistic analysis, we do not feel comfortable recommending the creation of a traditional legal entity structure, if the proposal were to be approved right now.”



GFXLabs’ latest proposal noted that concerns around taxes should be redirected to the protocol’s treasury.&nbsp;



“For the purposes of this proposal, treasury management is out of scope,” it wrote.



So far, Uniswap’s community governance has given the new fee switch proposal mixed reviews.&nbsp;



A community member who goes by <a href="https://gov.uniswap.org/u/markus0">markus0</a> noted that although the fee switch is technically feasible, it poses clear disadvantages. Beyond legal risks and increased competition from other DeFi protocols, DAOs also do not operate as effectively as a business, he notes.



“If we want to move towards turning on the fee switch, I think a much better idea would be selling a portion of the UNI in the treasury. If it turns out the DAO can effectively allocate those funds and handle the legal and tax ramifications of the sale &#8211; then let’s start thinking about turning on the switch,” markus0 wrote.



Cusack, the author of the initial fee switch proposal, noted that the latest proposal shared a similar weakness to the earlier one.



“It does not address what to do with any fees collected,” he wrote. “I’ve come to the strong belief that any fees collected by the protocol should be autonomously distributed in a programmatic way. There is a big design space in what that could look like but the main point is that they should not simply collect to a treasury where they are then arbitrarily distributed based on later token votes.”



Uniswap community governance will have another week before the proposal will be put on Snapshot for a temperature check.



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Uniswap Community Mulls Fee Switch Proposal

James Cirrone

Binance will support Bitcoin <a href="https://blockworks.co/tag/ordinals" target="_blank" rel="noreferrer noopener">Ordinals</a> — akin to NFTs on Ethereum — on its NFT marketplace beginning in late May 2023.



This means that Binance users will no longer need a separate Bitcoin wallet that supports Ordinals inscriptions, making transactions quite a bit easier.&nbsp;



“Binance users will also be able to purchase and trade Bitcoin NFTs directly with their Binance accounts,” a statement from Binance said. “This integration offers even more seamless and efficient trading for Binance users.”&nbsp;



The largest centralized crypto exchange also said it would be offering Bitcoin NFT creators “royalty support” and additional ways to generate revenue.&nbsp;



Mayur Kamat, Head of Product at Binance, told Blockworks that it&#8217;s too early to tell how transformational bringing Ordinals to the NFT platform will be, but “time will tell.”



“Since the beginning, everyone has wondered about Bitcoin use outside of [an] inflation hedge or [a] store of value. Not only has it shown massive value, but we are now seeing that the network can aspire to be more,” Kamat said.



Ordinals <a href="https://blockworks.co/news/cant-ignore-bitcoin-nfts">launched in January</a>, allowing users to “inscribe” text, audio, art or even <a href="https://blockworks.co/news/play-doom-bitcoin">video games </a>into individual satoshis, BTC’s smallest unit. They reside entirely on the blockchain.&nbsp;&nbsp;



This news of Binance’s integration of Ordinals comes after a rush of Ordinals inscriptions contributed to Bitcoin <a href="https://blockworks.co/news/bitcoin-transactions-record-ordinals">processing the highest number of transactions</a> in its 14-year history on May 1, 2023, <a href="https://dune.com/dgtl_assets/bitcoin-ordinals-analysis" target="_blank" rel="noreferrer noopener">on-chain data</a> shows.



More generally, Bitcoin transactions are breaking all-time records — there were <a href="https://blockworks.co/news/binance-bitcoin-withdrawals">444,000 unconfirmed transactions</a> sitting in the <a href="https://www.blockworksresearch.com/glossary#mempool" target="_blank" rel="noreferrer noopener">mempool</a> Monday morning. 



This surge in transactions and the skyrocketing fees were the reasons Binance gave for temporarily halting bitcoin withdrawals on Sunday. The company said it would adjust its fees to “prevent a similar recurrence in the future,” and flirted with a possible integration of the Bitcoin Lightning Network to speed up transactions.



<a href="https://twitter.com/binance/status/1655380303383261185" target="_blank" rel="noreferrer noopener">https://twitter.com/binance/status/1655380303383261185</a>



<a href="https://blockworks.co/news/binance-to-launch-nft-marketplace-in-june">Binance NFT</a> already added support for the Polygon POS network in March 2023 and the Ethereum network in October 2021.



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Bitcoin Ordinals NFTs Coming to Binance in Late May

Sam Reynolds

<div id="highlights-block_6141f6db39d9f" class="highlights">
 <ul>
 <li>Transaction fees paid to miners have dropped to a low not seen since March 2020</li>
 <li>Investors in the industry remain confident in North American infrastructure shift trend</li>
 </ul>
 
</div>



Transaction fees paid to bitcoin miners are at a low not seen since the <a href="https://www.cnbc.com/2020/03/13/bitcoin-loses-half-of-its-value-in-two-day-plunge.html" target="_blank" rel="noreferrer noopener">Covid crash of March 2020</a>, but experts think the decline is unlikely to affect the industry’s mining push into North America due to block subsidies which will remain in place <a href="https://www.bitcoinblockhalf.com/" target="_blank" rel="noreferrer noopener">until sometime in the spring of 2024</a>.



As of writing, bitcoin can be sent for 5 &#8220;satoshis&#8221; per byte (currently about $0.35), even at a high priority, meaning the transaction will be processed in the next block, or 1 satoshi per byte (about $0.07) if you&#8217;re willing to wait for 20-30 minutes. The fee is not linked to the value of the transaction, so a person could even send $1 billion for 7 cents and have settlement essentially guaranteed within a couple of hours.



<h3 class="wp-block-heading">How it works</h3>



The Bitcoin blockchain is made up of “blocks” of transaction data, cryptographically linked together. Blocks can vary in size (think of them as a page of a ledger or record book), based on a variety of factors. Currently, each block is <a href="https://www.blockchain.com/charts/avg-block-size" target="_blank" rel="noreferrer noopener">approximately 1MB</a> in size.



Block subsidies are rewards given to miners for their effort in securing the network and are determined by an algorithm in <a href="https://bitcoincore.org/" target="_blank" rel="noreferrer noopener">the protocol’s source code</a>. Subsidies are distributed upon the completion of a new block after the preceding one is finished, which occurs — on average — every 10 minutes.



<div class="wp-block-image"><figure class="aligncenter size-full is-resized"><img decoding="async" loading="lazy" src="https://blockworks-co.imgix.net/wp-content/uploads/2021/09/2021-09-15-BTC-blocks-copy.jpg" alt="BTC blocks" class="wp-image-7938" width="630" height="200" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2021/09/2021-09-15-BTC-blocks-copy.jpg?w=630 630w, https://blockworks-co.imgix.net/wp-content/uploads/2021/09/2021-09-15-BTC-blocks-copy.jpg?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2021/09/2021-09-15-BTC-blocks-copy.jpg?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2021/09/2021-09-15-BTC-blocks-copy.jpg?w=470 470w, https://blockworks-co.imgix.net/wp-content/uploads/2021/09/2021-09-15-BTC-blocks-copy.jpg?w=389 389w, https://blockworks-co.imgix.net/wp-content/uploads/2021/09/2021-09-15-BTC-blocks-copy.jpg?w=80 80w" sizes="(max-width: 630px) 100vw, 630px" /><figcaption>Recently mined Bitcoin blocks; Source: mempool.space</figcaption></figure></div>



Currently, the block subsidy is 6.25 bitcoins per block completed. Block subsidies comprise one part of the revenue miners generate from their activities. The remainder is transaction fees — the fees users of the blockchain pay to send bitcoin over the network.



<h3 class="wp-block-heading">Transaction fees matter</h3>



Transaction fees have fallen sharply since mid-April, due to a combination of lower network activity and <a href="https://bitcoinvisuals.com/ln-capacity" target="_blank" rel="noreferrer noopener">growing capacity</a> on the Bitcoin layer-2 Lightning Network. 



<figure class="wp-block-image size-full"><img decoding="async" loading="lazy" width="933" height="470" src="https://blockworks-co.imgix.net/wp-content/uploads/2021/09/2021-09-15-BTC-fees.jpg" alt="BTC fees" class="wp-image-7945" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2021/09/2021-09-15-BTC-fees.jpg?w=933 933w, https://blockworks-co.imgix.net/wp-content/uploads/2021/09/2021-09-15-BTC-fees.jpg?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2021/09/2021-09-15-BTC-fees.jpg?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2021/09/2021-09-15-BTC-fees.jpg?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2021/09/2021-09-15-BTC-fees.jpg?w=470 470w, https://blockworks-co.imgix.net/wp-content/uploads/2021/09/2021-09-15-BTC-fees.jpg?w=389 389w, https://blockworks-co.imgix.net/wp-content/uploads/2021/09/2021-09-15-BTC-fees.jpg?w=80 80w" sizes="(max-width: 933px) 100vw, 933px" /><figcaption>Fee revenue since April 2021; Source: blockchain.com</figcaption></figure>



“Although fees declining isn&#8217;t great for miners, I don&#8217;t see this as a long-term issue. We are still so early in the digital asset adoption curve that I think this will iron itself out over time,” Brian Dixon, Chief Operating Officer of Digital Currency and Blockchain asset management firm Off the Chain Capital, told Blockworks. “Most well-known mining operations are very profitable and can sustain themselves during this period of volatility.”



Indeed, in an August 3 note, Compass Point Research analyst Michael Del Grosso gave publicly listed miner Marathon Digital a buy rating, and called Riot Blockchain, another miner, a buy in an August 24 note.&nbsp;



Kevin Zhang, vice president of business development at Foundry, a Digital Currency Group subsidiary that provides financing for bitcoin and other mining equipment, also agrees that fee compression isn’t a huge deal for miners and won’t be making a “direct impact into the investment thesis or expansion plans in North America.”



“That being said, longer term, if the price of bitcoin in USD doesn’t continue to appreciate along the same pace as hashrate and network difficulty then the fee’s will need to increase to offset the lost revenue over time,” he added.



<h3 class="wp-block-heading">The hashrate factor</h3>



Bitcoin is programmed such that subsidies become easier or harder to achieve depending on the amount of hashrate available, and is updated roughly every two weeks to keep the average block time consistent. Increased hashrate improves the security of the network and is correlated with the $BTC price.



Despite some market volatility, generally speaking the mining industry has been on a bit of a bull run as it <a href="https://cms.blockworks.co/china-mining-exodus-seen-as-positive-for-bitcoin/" target="_blank" rel="noreferrer noopener">moves</a> to North America from China given the recent crackdowns in-country on the industry.&nbsp;



“It’s been a huge net positive for the market,” said Dixon, noting that as an investor he’s seen significant interest from energy companies looking at how bitcoin mining can use off-peak <a href="https://cms.blockworks.co/microstrategy-and-galaxy-bitcoin-mining-council-claims-mining-is-one-of-most-sustainable-industries/" target="_blank" rel="noreferrer noopener">power</a> making the grid more efficient overall.&nbsp;



Several of the largest US-listed bitcoin mining firms with operations predominantly in North America have collectively mined over 10,500 BTC year-to-date with nearly 40% of the output coming from the past two months, according to Off the Chain Capital. Five of the largest bitcoin mining firms have added almost all of their mined bitcoin to their balance sheets — adding up to 17,960 BTC as of August, valued at around $820 million, the firm also noted.&nbsp;



Dixon said that it&#8217;s going to take some time before companies are able to ramp up to full capacity. Generally, bitcoin miners don’t use data centers, but prefer to build out their own hosting facilities, which will take some time given the tight labor market in the US. And then there’s the monumental task of getting all the dedicated mining <a href="https://cms.blockworks.co/bitmain-set-to-add-56k-bitcoin-mining-rigs-in-georgia-state/" target="_blank" rel="noreferrer noopener">machines</a> to North America, in spite of the challenging freight market.&nbsp;



“This isn’t going to happen tomorrow,” Dixon said. “Covid continues to be a challenge when you are moving this much freight between countries.”



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