Data behind the seven major coins with reduced production: coin prices rose by an average of 143%, and mining revenue rose by an average of 77%

Source: PANews

Recently, "production reduction" coins, led by Bitcoin, have risen one after another, and the "production reduction concept" seems to have sounded the clarion call for a bull market.

The main coins that will see a reduction in production this year include BTC (hereinafter referred to as the native token to refer to the blockchain) and its forked coins BCH, BSV, BTG, BTG, Ethereum's forked coin ETC, anonymous coins DASH, ZEC, XZC, SERO, in addition to ZEN (Horizen) and Flo (Flo Network), etc.

The general significance of reducing production is to control inflation, stabilize value, and thus promote the stability of the blockchain network. There is also a view that reducing production can make cryptocurrencies have properties similar to precious metals such as gold, exchanging scarcity for use value and storage value.

Based on this, one of the basic expectations of coin holders for the reduction in production is that the price of the coin will rise. Judging from the reduction in BTC production, its price has indeed risen sharply after the previous two reductions. It is expected that in May this year, BTC will usher in the third reduction in production in history. Now the reduction in BTC production may have a wide-ranging impact of "a single move affects the whole body".

In addition, among the cryptocurrencies that will have their production cuts this year, BTC, BCH, BSV, ETC, DASH and ZEC are among the top 30 in terms of market capitalization (as ranked on CMC on February 10). In the cryptocurrency market where the "28 effect" is significant, changes in these leading assets may also have a significant correlation impact on upstream and downstream industries such as mining and trading.

PAData analyzed the coin price, on-chain transactions and mining situation before and after the two BTC production cuts in history, and focused on analyzing the changes in the coin price, on-chain transactions and mining data of the mainstream production cut coins since this year, in order to observe the impact of the production cuts and provide a reference for this year's series of production cuts.

BTC price rose significantly after two halvings, and the number of on-chain transactions increased steadily

Historically, BTC has experienced two halvings. The first occurred on November 28, 2012, when the block reward was halved from 50 BTC to 25, and the second occurred on July 10, 2016, when the block reward was halved from 25 BTC to 12.5.

According to statistics, when the first production cut took place in 2012, the price of Bitcoin was $12.2, and the increase in the first half of the year was about 134.62%. In the six months after the production cut, the price of Bitcoin reached $128.8, an increase of about 955.74%, and the highest reached $230.7, with the highest increase of about 1790.98%.

The first halving saw a significant rise in the price of Bitcoin, but the second halving was much milder.

During the second halving, the price of Bitcoin was $650.3, and it had risen by 51.30% in the six months before the halving. About a month before the halving, the "halving market" reached a small peak, and in mid-June, the price reached $767.4. However, as the halving approached, the price actually fell back, and even in early August after the halving, the price fell to $527, returning to the starting point of the price increase before the halving. It still went through an adjustment period of about two months. Within six months after the second halving, the price rose to $892.5, an increase of about 37.24%, and rose to a maximum of $11,354.5, with a maximum increase of about 1,646.04%.

Although the price of the currency has risen significantly after the production cut, the number of transactions on the Bitcoin network has increased steadily before and after the two production cuts. During the first production cut, the number of transactions on the Bitcoin chain was 37,300 times, and it rose to 50,800 times six months later, an increase of about 36.11%. In the six months after the production cut, the number of daily transactions on the Bitcoin network generally fluctuated above the mean.

However, during the second halving period, the number of daily transactions on the Bitcoin network has always fluctuated around the mean, and the increase in half a year is also lower than the first halving. The total number of on-chain transactions on the day of the second halving was about 220,800 times, and it rose to 281,700 times six months later, an increase of about 27.98%.

The second halving caused mining profits to drop by 13%

The production cut directly affected the mining income of miners. According to BitInfoCharts, during the first production cut, BTC miners could earn $3,655 per ton of computing power per day. In the first six months of the production cut, miners' income was basically stable. After the production cut, mining income dropped significantly, from $3,655/ton to $1,778/ton, a total drop of about 51.35% in three days. However, mining profits rebounded rapidly thereafter, rising by 53.43% in 180 days, reaching a maximum of $13,352/ton, a maximum increase of about 256.31%.

However, the situation during the second Bitcoin reduction in 2016 was different from the first. The mining income of miners dropped precipitously. After the second reduction, miners could earn $0.764/T per day, which was about 63.95% lower than the highest $2.119/T before the reduction. In the following six months, the mining income of miners did not recover quickly or even reach a new high, but stabilized at around $0.7/T, falling from $0.764/T to $0.669/T in half a year, a drop of about 13.00%.

Block rewards are only one component of miners’ income, the other component is transaction fees. If block rewards decrease, but transaction fees increase, it can make up for the decrease in income caused by halving to a certain extent.

According to statistics, the average daily transaction fee for each Bitcoin transaction was approximately US$0.0091 during the first Bitcoin production cut. Six months after the production cut, it rose to US$0.1195, an increase of 1213.19%, with the highest increase reaching 1762.64%.

During the second halving, the average daily transaction fee on the Bitcoin network was about $0.1707. Excluding some extreme cases, the average daily transaction fee was relatively stable before the halving. Within half a year after the halving, the average daily transaction fee rose to $0.3416, an increase of about 100.12%, with the highest increase of about 287.46%.

Although the average daily transaction fee is denominated in US dollars and is inevitably affected by the rise and fall of the currency price, according to the currency price corrected by Coin Metrics, the increase in the average daily transaction fee is significantly higher than the increase in the currency price during the same period. This indirectly shows that the transaction fee under the currency standard has increased after the production cut.

According to PAData's earlier analysis (see "Unveiling 2019 Bitcoin On-Chain Data"), transaction fees accounted for about 2.8% of miners' income in 2019. From this perspective, the rise and fall of the coin price is the decisive factor affecting miners' income after the halving, and the stability of miners' income will be related to the stability of the network.

Looking at the price, number of on-chain transactions and mining revenue trends during the two halving periods in Bitcoin's history, we can see that the second "halving effect" is much lower than the first. This is reflected in the fact that the price increase during the second halving was much lower than the first, and there was a correction after the halving. The increase in the number of daily transactions was lower than the first, the increase in the average daily transaction fee was lower than the first, and the daily mining revenue showed negative growth.

The price of the currency with reduced production this year has increased by more than 143%

BTC will have its third halving this year, and DASH will have its sixth halving this year, but other than that, BCH, BSV, ETC, etc. are all experiencing their first halving. Although each cryptocurrency has its own characteristics, considering that many of the halved coins are forked coins of BTC, and BTC’s current market value has always remained above 60%, it has a strong impact on other cryptocurrencies, so the historical impact of BTC’s halving may have a certain reference value. So, since the halving year, how have the mainstream halving coins performed? What is the possible trend in the future?

Since the start of the production cut year, the prices of the seven major production cut coins have all risen due to the concept of "production cut". From January 1 to February 5, in more than a month, BTC rose by 34.27% to $9,628. As of press time, BTC has already reached the $10,000 mark, with an obvious upward trend. And the current increase is still lower than the increase in the first six months of the previous two production cuts.

However, BTC has the smallest increase this year among the coins with reduced production. Its forked coin BCH has increased by 115.82%, BSV has increased by 208.45%, BTG has increased by 123.19%, two anonymous coins DASH and ZEC have also increased by 193.82% and 154.62% respectively, and Ethereum's forked coin ETC has increased by 176.13%. The price of the seven coins with reduced production has increased by an average of 143.76%.

Although the coin prices are constantly rising, judging from the on-chain data, the current daily transaction times are basically stable. Only BTG and DASH have experienced higher daily transaction times on certain days, but they immediately returned to the daily average level.

The average daily transaction volume of Bitcoin this year is about 311,400 times, which is close to the average level of last year (see "2019 Bitcoin Chain Data Review (Part 1)"). The average daily transaction volume this year has increased by 44.18%, and the current increase is higher than before the previous two halvings.

The average daily transaction number of BCH this year is about 45,500 times, an increase of 27.71%, BSV is about 461,600 times, an increase of about 61.92%, and BTG is about 1,200 times, an increase of about 43.53%. In terms of the average daily transaction number alone, BSV is the most active on-chain transaction among Bitcoin fork coins. In addition, the average daily transaction number of ETC this year reached 37,600 times, a slight decrease of 2.52%, and DASH and ZEC reached 26,900 and 3,400 times respectively, an increase of -4.3% and 52.47% respectively. Overall, the average daily transaction number of the seven major reduction coins has increased by 66.57% this year.

The transaction fee of the reduced-production coin increased by more than 176%

Judging from the average daily transaction fee, the average (median) transaction fee of the seven major halved coins this year has increased by 176.13%. Among them, BTC has increased from $0.2815 to $0.6627, an increase of 135.46%, which has exceeded the level during the second halving and is far higher than the price increase.

In addition, the average daily transaction fee of BCH increased by 251.73%, BSV increased by 144.96%, BTG increased by 24.62%, ETC increased by 176.13%, DASH and ZEC increased by 1286.29% and 207.11% respectively. Among them, the increase of the average daily transaction fee of BCH, DASH and ZEC is much higher than the increase of the currency price, which may indicate that the current transaction fees of these three public chains under the currency standard have increased compared with the previous period, especially DASH, the increase of transaction fees in the same period is more than 6 times the increase of the currency price. In addition, the increase of the average daily transaction fee of BSV and BTG is much lower than the increase of the currency price, and the increase of the two for ETC is equivalent.

Due to the impact of the production cut, the coin price has risen first, but the block reward has not decreased, so the current miners' mining income has increased significantly. Since the year of production cut, the average daily mining income of the seven major production cut coins has increased by 77.79%.

Among them, BTC's profit per T per day increased from $0.154 at the beginning of the year to $0.184 on February 10, an increase of about 19.48%. The increase in BSV's mining revenue was lower than BTC, only 14.58%. On February 10, no T of computing power could make a profit of $0.165.

The two anonymous coins with the highest increase in mining revenue are DASH, which has increased from $0.008 per GB of computing power per day at the beginning of the year to $0.021 on February 10, an increase of 168.23%, and ZEC, which has increased from $0.040 per K of computing power per day at the beginning of the year to $0.091 on February 10, an increase of about 129.87%. In addition, the mining profit increases of BTG and ETC have also exceeded 90%, reaching 98.31% and 92.83% respectively.

It is worth noting that after the second BTC production cut, mining profits fell sharply and failed to recover to the production cut level within half a year. However, the country is currently affected by the COVID-19 pandemic. The three major mainstream ASIC mining machines, Shenma Mining Machine, Bitmain and Canaan, have all issued announcements to postpone production, delivery, and after-sales. The computing power in the future may mainly come from the stock market. The limited growth of computing power may add more uncertainty to BTC production cuts.