While a Halving supply crunch always needed time to materialize, this Halving, the fee spike caused miners to earn more BTC instead of less, resulting in, at least temporarily, the absence of a supply shock. #Bitcoin
Discussion
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I don’t really see how that ties together. There are less bitcoin being mined so less available. Miners shouldn’t have to sell as much to cover cost because the fees are higher and the price as well. So wouldn’t a supply shock be much more likely?
Not sure I'm following you... miners sell as much as they need to cover costs, lets say that is 6btc per block.
Now the reward is 3.125, so naturally they would need to haggle harder to survive, they will request more from those that pay them in order to stay in business, some fail, supply falls and the typical buyers find themselves competing to buy from miners so the price goes up.
But right now, fees are high. This means that where a miner might get ~7btc per block, they now get ~10btc per block. They can continue to sell at the same price and remain competitive in the market and still save money for later too.
Eventually they'll start getting maybe ~4btc per block and they'll start using their reserves to remain competitive, then finally the crunch and the market as a whole realises that the value of bitcoin needs to go up to sustain mining and so it does.
Miners don’t set the fees. Fees are determined by the senders of transactions. And price isn’t driven by the market to sustain mining but trough demand coming from adoption right? This might be too complex for a text based discussion 😅.
Fees for individual transactions are set by users but markets affect user decisions.
Bitcoin blocks are intentionally capped in size, and transactions get prioritised to mine based on their fee compared to other transactions and this creates a fee market.
Miners have nothing to do with this, but a bunch of speculators are competing to get small transactions mined and are paying higher than sensible fees because they believe that the data they are including in their transactions, and the concept of owning it, is worth something that they can sell at a much higher price than the fee that they used. (I'm talking about NFTs, JPEGs, Runes, etc)
With that noise, where fees would normally be much lower, and paired with the lower block rewards, the miners would be earning much less, miners are currently earning much more. This means that the supply shock is not being realised.
A supply shock is when the producers of a good (miners) are in short supply of that good. They are currently not in short supply because their supply is the fees that they collect.
Fees have dropped recently, but of course these high fees not only prevented a supply shock, but they also provided a bit of abundance, so miners have a surplus that they can dip into in order to satisfy the buyer market.
I think it will be once the fees are low AND the surplus has dried up, that we will see the supply shock.
