04/22 update below. This post was originally published on April 21
Bitcoin
BTC
The bitcoin price has so far defied warnings that the bitcoin halving could trigger a “raging fire sale,” bouncing back from under $60,000 per bitcoin this week to around $65,000.
Now, bitcoin miners and traders are grappling with halving “chaos” which has pushed up bitcoin transaction fees to “unprecedented” levels.
Sign up now for the free CryptoCodex—A daily five-minute newsletter for traders, investors and the crypto-curious that will get you up to date and keep you ahead of the bitcoin and crypto market bull run
The bitcoin price has climbed following the bitcoin halving even as surging network fees cause … [+]
“This year’s halving was much anticipated, as halvings usually are, but we had a bit of an incident that requires some further explanation,” bitcoin author and self-styled “bitcoin expert” Jimmy Song posted to X.
“The block subsidy decreased from 6.25 bitcoin to 3.125 bitcoin on block 840,000 as expected, but what wasn’t expected was the 37.626 bitcoin in fees that came along with it. To give some context, that’s easily the highest ratio of fees to block subsidy that bitcoin has ever had. One transaction paid nearly 8 bitcoin in fees by itself”—worth a mind-boggling $520,000.
So-called bitcoin miners secure the bitcoin network and process transactions in exchange for newly minted bitcoin and transaction fees via powerful computers that are believed to use as much electricity each year as some small countries.
04/22 update: Billionaire investor and bitcoin convert Mark Cuban has warned that bitcoin miners will be hit by the bitcoin halving supply cut.
The Dallas Mavericks investor and Shark Tank star told The Block the bitcoin halving is “going to make it harder for miners to get paid.”
Cuban added that bitcoin miners could transition to AI data processing and model training to make up for the bitcoin income shortfall. “There is unprecedented demand from AI for those GPUs,” Cuban said. “Will that distort the economics of mining? Not just from the perspective of cost, but could it be a better business to use those GPUs to train [AI] models?”
Meanwhile, analysts at crypto investment company CoinShares also predicted bitcoin miners may transition to artificial intelligence data processing due to the 50% cut in revenue as a result of the halving.
“This trend suggests that bitcoin mining may increasingly move to stranded energy sites while investment in AI grows at more stable locations,” the analysts led by James Butterfill wrote, noting that bitcoin miners including BitDigital, Hive and Hut 8 are already generating income from AI while TeraWulf and Core Scientific have plans to expand into AI.
Song added that the five following bitcoin blocks mined had “fees of 4.486, 6.99, 16.068, 24.008 and 29.821 bitcoin respectively,” calling them the highest fees ever and the situation “unprecedented.”
Alongside people paying top dollar to have a transaction be one of the first following the halving, bitcoin network fees have been pushed up by runes, a new bitcoin protocol from the developer behind the controversial non-fungible tokens (NFTs)-on-bitcoin ordinals, Casey Rodarmor.
Sign up now for CryptoCodex—A free, daily newsletter for the crypto-curious
The bitcoin price has climbed in the run up to the 2024 bitcoin halving.
Runes is designed to allow fungible tokens, effectively memecoins similar to dogecoin, to be issued on the bitcoin network.
The first runes were issued on bitcoin block 840,000, “leading to the chaos we saw,” Song wrote.
Runes launching at the same time as bitcoin’s fourth halving is “thematically cool,” Rodarmor told Coindesk ahead of the bitcoin halving.
“We already frequently see blocks where the fee is greater than the block subsidy, and that will become more common over time with each halving.”
Runes is similar to the BRC-20 token standard which brought fungible tokens to bitcoin’s network, however, the protocol claims to be a more efficient implementation of token issuance.
