Good morning, Asia. Here’s what’s making news in the market:
Welcome to the Asian morning briefing, a daily summary of vital stories from the US time zone, including market movements and analysis. For more insights on the US market, see Coindesk’s Crypto Daybook Americas.
Bitcoin is lingering near record prices, but activity on the blockchain is notably subdued. GlassNode data indicates that trading fees have plummeted to their lowest levels in a decade, even as BTC hangs around six-figure numbers.
Traditionally, spikes in fees have aligned with bull markets as traders compete for block space. However, this year, the price curve remains flat despite rising prices. This suggests that the demand on the blockchain isn’t what’s driving the market anymore.
New reports from Galaxy Research indicate that since April 2024, the median daily fees have dropped by over 80%, with 15% of transactions clearing in the daily block at a mere 1 Satoshi per VByte. Almost half of the recent blocks aren’t filled, signaling weak demand for block space and inactive memo pools.
This stands in contrast to prior bull cycles where rising prices were closely tied to increased activity and surging fees.
The facts reflect significant structural changes. Currently, spot ETFs and custodians hold over 1.3 million BTC, and these coins rarely interact with the blockchain.
Additionally, retail activity that once congested the Bitcoin network has shifted to Solana, where Memecoins and NFTs thrive due to faster and cheaper transactions. As a result, Galaxy suggests that while Bitcoin prices are influenced by external factors, there’s been a noticeable decline in on-chain demand that hampers price transfers.
For miners, this situation is particularly challenging. Profitability pressures are mounting as the reward has been halved to 3.125 BTC, and operating costs contributed to less than 1% of block revenue in July. Many miners are now looking to diversify into hosting AI and high-performance computing.
Earlier this year, a report by Rittenhouse research mentioned that Galaxy Digital’s withdrawal from mining could be a potential model for the industry.
This shift has gained traction in the stock market. Bitcoin has dropped over 3% year-to-date, while the Coinshares Bitcoin Mining ETF has seen an increase of nearly 22%. Investors seem to favor companies that focus on diversification over those heavily reliant on block rewards.
Miners like Hive, Core Scientific, and Terawulf have reported gains in their second-quarter results thanks to HPC and AI hosting revenues.
On the other hand, non-diversified players like Bitdeer and Bitfufu are struggling, remaining heavily exposed to rising electricity costs, equipment depreciation, and the fee market that Galaxy outlines in its reports.
Galaxy’s research suggests that while the Bitcoin blockchain’s role in settlements has plateaued, the company’s focus is shifting towards growth in AI data centers.
According to on-chain data, without sufficient demand for block space, fees can’t provide the necessary security. Additionally, amidst low prices, it seems clear that the best growth potential for the mining sector may lie more in AI than in Bitcoin itself.
Market movements
BTC: Bitcoin is trading at $113,286.95, down 1.79% after briefly hitting a six-week low of around $110,600.
ETH: Ether remains stable at $4,779 as Jerome Powell’s dovish comments from Jackson Hole raise expectations for interest rate cuts in September. Asset managers anticipate an ETH breakout above $5,000, despite the potential risks linked to Bitcoin’s new heights and market volatility.
Gold: Gold closed at $3,371, buoyed by the optimistic outlook for interest rate reductions after Powell’s remarks.
Nikkei 225: Stocks in the Asia-Pacific region rose on Monday, with Japan’s Nikkei 225 climbing 1.08% following Powell’s hints at a possible Fed rate cut in September during his speech at Jackson Hole.
Other insights
- Funds: Why are they bullish now to raise Crypto VC funds?
- Why Luca Netz finds it “disappointing” if Pudgy Penguins doesn’t IPO in two years.
- KPMG projects that investor interest in digital assets will drive a robust second half for Canada’s fintech.
