tl;dr
Capital is flowing heavily into ETFs and custodians, with Solana attracting retail traffic, while Bitcoin’s onchain demand remains stagnant despite price near record highs. Transaction fees on Bitcoin have collapsed to decade lows, indicating weak blockspace demand and a dormant mempool. Spot ETFs a...
Capital is flowing heavily into ETFs and custodians while Solana attracts retail traffic, yet Bitcoin’s onchain demand remains stagnant, raising concerns about miners’ ability to sustain the network without meaningful transaction fees. Despite Bitcoin’s price holding near record highs, the blockchain itself shows little activity, with transaction fees collapsing toward decade lows even as BTC flirts with six figures.
Data from Glassnode reveals a flat fee curve this year amid rising prices, signaling that onchain demand no longer drives the market. A Galaxy Research report highlights that median daily fees have dropped over 80% since April 2024, with up to 15% of daily blocks clearing transactions at the minimum fee of 1 satoshi per vbyte. Nearly half of recent blocks remain underfilled, indicating weak demand for blockspace and a dormant mempool—contrasting sharply with previous bull cycles when price surges caused congestion and fee spikes.
This trend reflects a structural shift: spot ETFs and custodians now control over 1.3 million BTC coins that rarely move onchain. Meanwhile, retail activity that once congested the Bitcoin blockchain has migrated to Solana, where memecoins and NFTs benefit from lower costs and faster transactions. Galaxy Research notes that Bitcoin’s price is increasingly set by custodial inflows, undermining the network’s traditional role as a price movement proxy.
For miners, this situation is particularly challenging. With block rewards halved to 3.125 BTC and transaction fees contributing less than 1% of block revenue as of July, their profitability faces pressure. This has prompted listed miners to diversify into AI and high-performance computing (HPC) hosting. A recent Rittenhouse Research report suggests that Galaxy Digital’s exit from mining may serve as a model for the sector.
Equity markets have responded positively to this diversification. Although Bitcoin is down over 3% year-on-year, the CoinShares Bitcoin Mining ETF has risen nearly 22%. Investors reward firms that pivot toward AI and HPC revenues alongside traditional mining income. Listed miners like Hive, Core Scientific, and TeraWulf reported Q2 results bolstered by these new revenue streams, while less diversified players such as Bitdeer and BitFuFu remain vulnerable to electricity costs, equipment depreciation, and a weak fee market.
The contrast is telling: Galaxy’s research shows Bitcoin’s settlement role stagnating, even as the company reallocates resources toward AI data center growth. Onchain data underscores a critical point—without organic blockspace demand, low fees jeopardize blockchain security. If fees remain suppressed, the clearest path to future returns in the mining sector may lie in AI, not Bitcoin mining itself.