April 26, 2024
Greg Cipolaro

Research Weekly - Post Halving Observations


  • Bitcoin’s fixed and programmatic supply function is on display as Bitcoin experienced its fourth halving last Friday evening.
  • Fees jump, albeit temporarily, as Runes makes its debut, breaking records in both dollar amounts and miner revenue share.
  • Following the halving, difficulty is adjusted upward by 2.0%, up slightly from where it was tracking pre-halving indicating miners did not react to the halving by reducing hash rate.

Takeaways from Bitcoin’s Fourth Halving

Last Friday evening, Bitcoin underwent its fourth halving, cutting the block subsidy from 6.25 bitcoins to 3.125. While many in the community viewed this as a momentous event, a demonstration of Bitcoin’s programmatic and fixed supply, Bitcoin’s halving should be as known and predictable as any event in all of crypto. While the event went through without a hitch, the launch of another protocol, Runes, had a profound impact on the network. While the impact from Runes is increasingly looking to be short lived, we take a look at what happened to the network in the wake of the halving and what it might suggest for the future.

As Expected, Price Unaffected

The halving didn’t have any perceptible impact on price, but we didn’t go into the event expecting one either. Price did rally post halving but it’s hard to attribute that directly to the halving. Risk markets, like equities, did rally in the early part of the week, which may have been more of a driving factor than anything idiosyncratic with Bitcoin. Flow of funds into the spot ETF complex was positive on Monday and Tuesday of this week as well, before reversing on Wednesday.

Difficulty Gets Revised Upward Following Halving

Bitcoin’s reward halving block, number 840,000, occurred right in the middle of a difficulty adjustment window. Bitcoin’s difficulty had previously been adjusted on block 838,656, well ahead of the halving block, and then again following the halving on block 840,672. Bitcoin’s difficulty ended up being upwardly revised by 2.0% but had been tracking up 1.7% - 1.8% heading into the halving. The fact that difficulty ended up being revised higher than it was tracking into the halving (difficulty change estimates are just that, estimates) is reasonable indication that miners did not turn off hash rate post halving and if anything continued to add hash rate.

Fees Jump Temporarily with the Launch of Runes

The most impactful event at the halving outside of the 50% reduction in the block subsidy, was the launch of Runes, a fungible token protocol, on the halving block. The launch of Runes, from Casey Rodarmor, the creator of Ordinals, resulted in a huge increase in transactional demand, as users rushed to create, mint, and transfer runes.

The result of the flurry of transactional activity was a jump in fee rates, which was a substantial benefit to miners, albeit temporary. Median per block fee rates skyrocketed from 90 sat/vb to a high of 2,892 sat/vb just after the halving as a result of the Runes frenzy. Fees as a share of total miner revenue (including the block reward) hit a new all-time high as well as total fees in dollar terms (but not BTC terms). In fact, April 20th, the day after the halving was the single biggest day for miner revenue in the history of Bitcoin in dollar terms chiefly because of transaction fees. This was a nice benefit to miners as they saw the main source of their revenue get cut in half. The phenomenon appears to be short lived as today, less than a week since the launch of Runes, transaction fee rates have fallen to levels lower than where they were pre-halving.

One final note on fees, the winning mining pool of the halving block, ViaBTC, auctioned the “epic sat” (first satoshi in the halving block) for 33.3 BTC or $2.1M, a figure not included in these measures of miner revenue.

Hash Price Helped by Fees

Bitcoin's hash price, the value of a miner's hash rate, experienced a significant surge followed by a subsequent downturn. With the majority of a miner's earnings coming from the block subsidy, which was recently halved, it was anticipated that the hash price would decrease. Despite the cut in the block subsidy, the decline was temporarily offset by a surge in transaction fees. However, the hash price has returned to more expected levels following the normalization of fees now that the frenzy around Runes has subsided.

Market Update

Bitcoin rose 1.8% on the week in mostly sideways action. Flows into the spot ETF complex turned to outflows in the second half of week, with Fidelity (FBTC) and Valkyrie (BRRR) showing the first daily outflows since launching. Blackrock’s IBIT halted its daily inflow streak at 71 days and has seen no net flows in the past 2 trading days. IBIT has gathered $15.5B in that time frame, making it the most successful ETF launch ever. GBTC continues to see outflows, the total standing at $17.1B, unprecedented for any fund. The AUM lead that GBTC once had over IBIT has shrunk considerably with GBTC at $19.3B in AUM and IBIT at $17.7B.

Traders are looking for the next catalyst, which may come next week with the start of trading of 3 spot bitcoin ETFs in Hong Kong on April 30th. However, because these funds are not eligible for mainland investors, at least initially, demand for the products will likely be limited.

Equities ended the week up after see-saw trading driven by earnings of technology companies. Bond were mixed with investment grade bonds down 0.2%, high yield bonds up 0.5%, and long term US Treasuries down 1.2%. Gold fell 2.2% while oil rallied 1.0%.

Important News This Week


Morgan Stanley Explores Letting Brokers Recommend Bitcoin ETFs: Sources - Advisorhub

BlackRock's Bitcoin ETF Snaps 71-Day Inflow Streak, Data Show - CoinDesk

'Bitcoin Sign Guy' Has Sold His Original Sign for 16 BTC - CoinDesk

Bitcoin ETF Hype Cooling, But BTC Will Still Hit $150,000: Standard Chartered - Decrypt

Bitcoin Mining Pool ViaBTC Sells 'Epic' First Post-Halving Sat - CoinDesk

Regulation and Taxation:

Founders and CEO Of Cryptocurrency Mixing Service Arrested And Charged With Money Laundering And Unlicensed Money Transmitting Offenses - DOJ

DOJ Says Binance Founder Changpeng Zhao Should Spend Three Years in Prison - CoinDesk

SEC Suggests $5.3 Billion Fine for Do Kwon, Terraform Labs - The Block

US SEC Expected to Deny Spot Ether ETFs Next Month, Industry Sources Say - Reuters

Key Democrat Touts Progress on Stablecoin, Marijuana Legislation - Bloomberg

Consensys Sues the SEC In Defense of The Ethereum Ecosystem - Consensys

Alert on Cryptocurrency Money Services Businesses - FBI


Bitcoin Miner Gridless, Backed By Block, Builds Site At Kenya Volcano - CNBC

Katie Haun to Step Down from Coinbase Board - Twitter

Binance’s Rivals Muscle in on Bitcoin Trading Around the World - Bloomberg

Latest Updates: 3nm Chip Headed to The Foundry, Our New Mining System, And More - Block

Bitcoin Payments App Strike Rolls Out Services to European Users - The Block

Galaxy, Lightspeed Faction Lead $15M Raise for Turnkey, Crypto Wallet Startup from Former Coinbase Employees - Source

Upcoming Events

May 1 - FOMC interest rate decision

May 15 - April CPI reading

May 23 - SEC response deadline for spot ETH ETFs

May 31 - CME expiry

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