Two years into miners’ commission income, the “Z-score” chart finally returned to a positive result after a long time, indicating new waves of adoption.
The 60% increase in bitcoin (BTC) so far this year could be just the first milestone in its upward run, given that miners’ transaction fee revenues are rising.
The “Z-score” chart of miner fee revenue, an indicator used to identify periods of high and low transaction fees, turned positive for the first time since mid-2021, according to Glassnode data.
The positive change suggests that miners’ revenue per transaction fee is moving away from the two-year average as a sign of higher network demand. Historically, the return to higher fees has coincided with the start of major bull runs.
“Motivated by renewed demand from Ordinals and Inscriptions, the two-year Z-score for miner revenue from commissions returned a positive result,” said James Check, senior analyst at Glassnode, in a weekly market update.
“Elevated commission pressure is a common precursor to more constructive markets and coincides with new waves of adoption expressed through growing demand for block space,” Check added.
The Z-score chart measures the number of standard deviations from the two-year average commission revenue. The indicator is typically positive and rising during bullish runs, and negative during bearish periods.
Bitcoin miners are responsible for solving complex algorithmic calculations and adding new transactions to the blockchain or ledger in exchange for rewards paid in BTC. In addition, miners also receive a share of transaction fees.
The commissions depend on the size of the transaction and the network volumes; i.e., the degree of congestion it presents. Transactions are processed in blocks and store up to one megabyte of information. Therefore, a sudden spike in activity often causes network congestion and leaves transactions waiting to be verified. In these situations, miners first focus on the highest commission transactions. In other words, the more a user offers in fees, the faster their transaction will be verified.
The network has seen a flurry of activity since the January launch of the Ordinals protocol, which allows users to inscribe references to digital artwork in small transactions on the Bitcoin blockchain.
The seven-day average of daily transactions on the Bitcoin network increased 28% this year and reached a two-year high of more than 333,000.
“Miners are clearly the main beneficiaries of this revenue, as they saw their total revenue soar to US$22.6 million per day. This week, miners’ revenues reached the highest point since June 2022 and convincingly outperformed the annual average,” Check said, adding that this is typically seen near “transition points to a more constructive market.”
The recent positive turn of events in the Bitcoin network, as highlighted by Glassnode data, indicates a possible surge in demand for the cryptocurrency. This development is demonstrated by the return of the “Z-score” chart of miner fee revenue to a positive result since mid-2021. According to Glassnode’s senior analyst, James Check, this positive change suggests higher network demand and growing adoption, as evidenced by elevated commission pressure. It is worth noting that Bitcoin SV, with its focus on scalability and security, is a promising cryptocurrency that has gained a significant following in the crypto community. As such, its inclusion in the Bitcoin network may also contribute to the growing demand for the cryptocurrency, as miners’ revenue per transaction fee continues to rise.