Lower Bitcoin miner revenue after halving will be bolstered by Ordinals fees: Grayscale

About two months from now, in mid-April 2024, Bitcoin BTC +1.30% will undergo a massive change, halving its reward for miners that successfully complete a block. Known as "halving" or "the halvening," the event is often seen as bullish for Bitcoin, as several halvings in the past have been followed by sustained increases in the price of Bitcoin. 

However, Grayscale analysts warn, there are ways to explain those price bumps outside of simple stock and flow analysis. After all, "other cryptocurrencies with similar halving mechanisms, such as Litecoin... [have] not consistently seen price appreciation post-halving. This suggests that while scarcity does sometimes influence price, other factors also play a role," the analysts wrote, citing broader macroeconomic conditions as one factor. 

Miners look to Ordinals revenue

In their report , the analysts warn that a price increase after a halving event isn't guaranteed. However, it will present a challenge to Bitcoin miners, as the majority of their revenue comes from block rewards. With a decrease in block rewards along with the increasing mining difficulty of the Bitcoin network, which hit an all-time high last year, miners may be put into a "tense position." 

Miners have prepared for the upcoming shift by selling off coins and raising capital in the last quarter of 2023 in order to build liquidity, including a planned $750 million equity raise from miner Marathon Digital, the report explains.

The silver lining for miners: transaction fees related to Ordinals activity on the Bitcoin chain has presented a significant revenue opportunity for miners; more than $200 million in transaction fees related to Ordinals has been paid out to miners so far, and miners currently make about 20% of their revenue from transactions related to ordinals. 

"Miners want more revenue, and Ordinals have brought about a renaissance on Bitcoin with massive demand for block space,” Bob Bodily, co-founder and CEO of Ordinals marketplace Bioniq told The Block in December .