Bitcoin Mining Revenue from Transaction Fees Shot Up to its Highest Level Since July 2019

In anticipation of the miner profitability to be reduced by 50%, that is halving, the percentage of BTC mining revenue generated from transaction fees shot up to its highest levels since July 2019, as per Coin Metrics.

“This is a positive signal for miners, as an increase in transaction fees can potentially make up for some of the lost block reward revenue after the upcoming halving.”

In the weeks leading up to the halving, it went above 6% which usually remains around 2%. In mid-2019, it went up to as high as almost 12%.

Source: Coin Metrics BTC Fees to Revenue

It is the result of a spike in bitcoin average transaction fee which also climbed to $3.19 on May 8th, last seen in July. During this gap, the fees remained below a dollar for the most part. The highest this fee has been was on December 22 during the 2017 bull run.

Besides fees, mempool data shows a massive backlog of bitcoin transactions. At one point today, 34.98k bitcoin transactions were waiting to be confirmed and processed by Bitcoin miners.

Source: Mempool Transaction Count

The revenue generated from both block rewards, which is now officially 6.25 BTC, and transaction fees are crucial for a proof-of-work (PoW) blockchain, as this revenue provides an incentive for miners to secure the network.

In the long-run, transaction fees will become an increasingly important part of bitcoin’s security model as the block reward continues to be cut in half every four years.

“As block rewards diminish, a larger portion of miner revenue will need to come from transaction fees. Therefore the percentage of BTC mining revenue generated from transaction fees is an important measurement for a blockchain’s long term health and security.”

Miners to be no more the biggest seller of Bitcoin

The reduction in block rewards also means, “miners will cease to be the biggest seller of bitcoin,” points out on-chain analyst Willy Woo. In turn, “exchanges selling their BTC fees collected into fiat” will bring the biggest sell pressure.

These exchanges or “tax agents on traders” will extract fees in BTC that will be dumped onto the markets and then sold for fiat the same as miners do.

Unlike traders buying or selling, where every trade has a buyer and a seller as such smart money buying or selling, miners and exchanges are unmatched sell pressures on the market.

The volume is already growing, on the spot exchanges the “real volume” hit $4 billion recently while the total aggregate daily volumes of bitcoin futures was $27 billion, as per Skew.

“The rise of the BitMEX style futures exchanges has made an irrevocable footprint on the price, we have much more sideways now from the additional sell pressure. While price moves more sideways, this creates an environment where large leverage traders have an easier time strategically liquidating the bulk of traders from their positions,”

and as such more volatility, explained Woo.

From here on in, futures exchanges that bring liquidity to markets will be the “largest bearish pressure on Bitcoin” further slowing down the price increase.

Read Original/a>
Author: AnTy

What’s the Effect of CME Launching Bitcoin Options on BTC & Altcoins?

  • Amidst the high anticipation for the product, CME has launched its Bitcoin options that are now open for trading
  • Binance-backed FTX also launched options on bitcoin and traded $1 million within the first two hours
  • “There’s been high anticipation for institutional adoption of Bitcoin for a very long time,” – Bloomberg

Options on CME’s Bitcoin futures contracts has been launched today. Each of these contracts represents five BTC. Quoted in US dollars, these contracts are cleared centrally to avoid counterparty risk.

These options are introduced in response to “growing interest” in digital currencies and customer demand for tools to manage BTC exposure. As CME states, “CME options on Bitcoin futures (BTC) are now trading.”

To track BTC price, CME relies on data from multiple top bitcoin exchanges. Currently, BTC/USD is trading at $8,096 with 24 hours loss of 0.38% while managing the daily trading of $497 million on top ten exchanges with real volume, as per Messari.

As the first mover, when CME launched bitcoin futures in December 2017, BTC price topped around $20,000. Bakkt’s launch also saw BTC price dragging but this time there isn’t notable movement in BTC price.

Unlike other exchanges, CME is a regulated platform to trade cash-settled bitcoin futures, just like Bakkt. ICE’s Bakkt launched options last month.

Before this launch, CME recorded strong activity, noted analytics firm Skew.

Open interest on CME Bitcoin futures has also jumped in the excitement of options launch.

While good for BTC, this might not be positive for altcoins as trader Ceteris Paribus notes, “the more we see products like this get offered the more bearish it is for the majority of alts.”

“99% of alts are basically quasi-derivatives of Bitcoin. Now we’re getting actual derivatives to trade. Majority of alt volume was just seen as beta within crypto… now there will be easier, more liquid ways to get that,” added Paribus.

“High Anticipation” of Bitcoin Options

Speaking about the “high anticipation” of Bitcoin options launch on the CME, Bloomberg’s Sonali Basak who has ”very heavily” covered BTC said, “There’s been high anticipation for institutional adoption of Bitcoin for a very long time.”

Although futures and options markets are opening up, Basak said, some of the fundamental concerns for big institutional investors in the form of regulatory risk and how to treat BTC are still problems.

Reflecting on JPMorgan Chase’s report from Jan. 10 that claims that institutional interest in Bitcoin-related contracts is building but the digital assets’ intrinsic value is still below its market value, she said, “on one hand there’s a lot of institutional interest but on the other hand there’s a lot of risks still there.”

But the “Bloomberg Daybreak: Americas,” host points out it’s exactly the way investment banks treated, to which Basak says,

“Let’s be honest investment banks love risk and so they wanna love it (..)They want to love it and they are aware that it’s there but there’s a lot of risks Bitcoin does pose to existing business models.”

Kicking off 2020

However, CME wasn’t the only one that launched options, Binance-backed FTX also launched options on bitcoin. The exchange also recorded strong activity, within the first two hours it saw $1 million in trading activity.

As for the current Bitcoin futures options volume, the picture somewhat looks like this,

Bitcoin options are having a good start of 2020. Just last week, daily volumes climbed to $90 million.

Among these exchanges that have options on bitcoin, Deribit exchange accounts for 95% of all trading activity last year. But last week, the Dutch-based exchange moved its operations to Panama citing regulatory concerns.

Read Original/a>
Author: AnTy