• Bitcoin’s 60% year-to-date surge in value may point to a bull market ahead.
• The two-year “Z-score” for miner revenue from fees has turned positive after a long time.
• This suggests miners’ revenue from transaction fees is deviating higher from the two-year mean in a sign of increased network demand.
Bitcoin Miners’ Revenue From Fees Rises
The Bitcoin (BTC) network’s recent 60% year-to-date surge in value may be pointing to a major bull run, as miner revenues from fees have risen to suggest an onset of new waves of adoption. According to data source Glassnode, the two-year “Z-score” for miner revenue from fees has turned positive after a long time, signaling increased network demand and higher fees than usual.
What is the Z Score?
The Z score measures the number of standard deviations from the two-year mean fee revenue. It is usually positive and rising during bull runs and negative during bear runs. During this period, Bitcoin miners are solving complex algorithms which require resources and energy, with their reward coming in both block rewards and transaction fees.
Indicator Suggests Return of High Fees
According to Glassnode’s lead analyst James Check, the indicator turning positive indicates a return of high fees which often coincides with new waves of adoption on the Bitcoin network.”Bolstered by a new demand from Ordinals and Inscriptions, the 2yr Z Score for miner revenue from fees has turned positive,” Check said in his weekly market update.”Elevated fee pressure is a common precursor to more constructive markets, coincident with new waves of adoption, expressed via increasing demand for blockspace,” he added.
Increased Network Demand
The increasing miner revenues from transaction fees points towards increased network demand as it suggests that more users are now willing to pay higher transaction costs than before – particularly Ordinals who want their transactions processed quickly on the blockchain – resulting in an increase in overall fee pressure on the network. This could potentially lead to further price appreciation if this trend continues into 2021 and beyond.
Historically Proven Precedent
Historically speaking, this phenomenon has proven itself as being an indicator that precedes major bull runs – so investors should keep an eye out for signs that this could be signalling one again as we move forward through 2021. With more people than ever before looking at cryptocurrencies as potential investments or hedges against inflation due to macroeconomic uncertainty around traditional assets such as stocks or bonds, there is certainly plenty of potential here for significant gains over time if things go according to plan.