Bitcoin Miners Not Selling Despite Record Fees: Data

Valencia, Spain, April 5, 2021: A golden bitcoin on the dirty hand of a miner. Metaphor for mining BTC and cryptocurrencies. Digital business and decentralized economy concept.

Bitcoin miners have been raking in historically high transaction fees lately, but on-chain data shows that this group is still not selling.

Bitcoin Miners have not transferred much volume to exchanges recently

Transaction fees on the Bitcoin network have shot up recently due to the increased traffic caused by Ordinals, a protocol that allows data to be written into the Bitcoin blockchain with transactions.

In general, transaction fees remain low during periods of low activity on the blockchain, as investors do not need to pay higher fees to get transfers through quickly.

However, when the network is congested, wait times in the mempool can be longer, so senders who want their transfers to be processed more quickly add a large amount. This gives miners an incentive to handle such transfers first.

There’s been some extraordinary congestion on the blockchain lately, so it’s no surprise that transaction fees have blown up to some pretty high levels, as the chart below from Rafael Schultze-Kraftthe co-founder of Glassnode, shows.

The value of the metric seems to have been quite high in recent days | Source: Rafael Schultze-Kraft on Twitter

As shown in the graph above, Bitcoin transaction fees have recently risen to $17.7 million, which is an extremely high amount even compared to the height of the recent bull run.

The main reason behind this increase has been the increase in the use of Ordinals. In particular, the rise in popularity of BRC-20 tokens, fungible tokens created using the Ordinals protocol, has been at the center of this activity. Many meme coins have emerged that are based on this protocol, including the explosively popular Pepe Coin (PEPE).

From the chart, it is visible that only the 2017 bull run peak saw the total transaction fees on the blockchain hit higher values. The first half of the 2021 bull run peak had similar but still slightly lower levels to the current peak.

Naturally, the miners are enjoying the burst of activity on the network right now, as transaction fees form one of the two main revenue streams for these chain validators (the other being the block rewards).

In such a period of booming business, there may be concerns whether the miners will sell some of their reserves here to realize these high earnings. But so far, the transaction volume from the miners moving towards centralized exchanges has remained low, according to the chart shared by Mitchell from Blockware Solutions.

Looks like the value of the metric has stayed low recently | Source: MitchellHODL on Twitter

Usually, these investors transfer their coins to exchanges when they want to participate in the distribution of the asset. Since they haven’t sent any suspicious amounts to these platforms lately, it’s possible that they don’t intend to sell their Bitcoin yet.

This could be a positive sign for the market as it could mean that this BTC cohort has decided to accumulate the additional income they have received recently.

BTC price

At the time of writing, Bitcoin is trading around $27,600, down 4% in the last week.

BTC has observed some decline in the last few days | Source: BTCUSD on TradingView

Featured image from iStock.com, charts from TradingView.com, Glassnode.com