Coin Metrics: Bitcoin data observations in Q1 2025

Author: Tanay Ved Source: Coin Metrics Translation: Shan Ouba, Golden Finance

Key Points

• Miner revenue has stabilized after the halving, but transaction fees remain low, putting pressure on long-term incentives. Mining companies continue to adapt to the environment, investing in efficient hardware and utilizing renewable energy.

• Bitmain ASIC devices account for a major share of the Bitcoin network’s computing power, raising concerns about supply chain risks and geopolitical interference.

• Bitcoin is gradually evolving into a means of storing value, but efforts to expand its transactional use through Layer-2 solutions and other means continue.

• As block rewards decrease, maintaining miner incentives may require higher value transactions and drive block space demand through competition to generate significant transaction fee revenue.

Introduction

With Bitcoin’s fourth halving nearly a year away, miners are going through an adaptation period to cope with reduced block rewards, narrowing profit margins, and changes in the way they operate. In this article, we provide an update on the Bitcoin mining ecosystem, including miner revenues, exchange fund flows, and ASIC hardware distribution. At the same time, we explore Bitcoin’s current use case—as a medium of exchange or a store of value—and the impact this has on miner incentives and the long-term sustainability of the network.

Mining Latest News

Miner Income and Capital Flow

In the fourth quarter of 2024, miners' total income (including transaction fees and new block rewards) reached $3.7 billion, an increase of 42% from the third quarter of 2024. In the third quarter, miners faced the challenges of halving block rewards, low Bitcoin prices, and rising energy costs, and were forced to improve mining efficiency.

As of the first quarter of 2025, miners' total income was approximately $3.6 billion, of which transaction fees accounted for only 1.33%, and the 30-day average computing power had risen to 807 EH/s.

Miners' capital flow strategies are constantly adjusting. Data shows that 0-hop inflows from miners directly transferring to exchanges have remained basically stable, but there are occasional large sell-offs, indicating that mining companies are conducting stable capital management. 1-hop inflows (miners transferring to exchanges through intermediate addresses) have gradually increased, which may reflect the continued selling pressure from smaller miners or mining pool members.

Evolution of Miner Strategies

Well-funded miners are better able to cope with the decline in revenue brought about by the halving, and they are adopting a variety of strategies to adapt, such as upgrading to more energy-efficient ASIC equipment to improve mining efficiency per unit of electricity. Migrate to areas with lower energy costs, such as wind farms in Texas, or to energy-underutilized regions such as Africa and Latin America to reduce operating costs. Diversification, some mining companies have begun to get involved in the AI data center hosting business to expand their revenue sources. For example, Core Scientific has pledged to provide 200 megawatts of computing power capacity to host CoreWeave's AI computing tasks. This shows that mining companies are transforming existing infrastructure into high-performance computing centers to improve profitability per unit of computing power.

Bitmain's hardware dominance and geopolitical influence

Although the geographic distribution and mining pool computing power distribution of Bitcoin mining are critical to the network's risk resistance, the supply of ASIC hardware is also a factor that cannot be ignored. While economic incentives and energy costs have prompted miners to disperse around the world, the geopolitical environment has brought additional challenges to the hardware supply chain.

Based on the matching analysis of Nonce patterns and known ASIC devices, we estimate that Bitmain-produced mining machines (such as S19, S19j Pro, S19 XP) currently account for 59% to 76% of the Bitcoin network's computing power. This data is based on multiple levels of calculation, including minimum estimates, adjusted data, and fully processed data sets.

Bitmain dominates the market for Bitcoin mining hardware, and this reliance on a single manufacturer is a potential risk even with a distributed supply chain. As Bitmain is headquartered in China, its market dominance highlights the impact that geopolitical factors may have on the stability of mining. For example:

• In early 2025, several US miners experienced delays in the delivery of Bitmain mining machines due to strict customs inspections, new tariffs, and other factors.

• Although the impact of these delays varies, they highlight the friction that the geopolitical environment may bring to the global mining industry and may reshape the industry landscape.

Current Use of Bitcoin

As mining competition intensifies and transaction fee income becomes more important, understanding the actual use of Bitcoin can help assess the sustainability of its network and the incentive mechanism for miners. Although Bitcoin's original goal was to become a "peer-to-peer electronic cash system", its use is gradually shifting to a global store of value and reserve asset.

Lightning Network and Bitcoin Layer-2 Ecosystem

In order to improve Bitcoin's transaction functions and cope with scalability limitations and unstable transaction fees, second-layer solutions such as the Lightning Network have emerged. The Lightning Network enables near-instant, low-cost transactions by creating an off-chain payment channel between users, and only returns to the Bitcoin main network for settlement when the channel is closed.

Recently, the number of open lightning channels has dropped to about 52,700, but the total value of channels remains between 4,500-5,000 BTC. This suggests that despite the reduction in the number of channels, the network can still maintain the same value flow, which may benefit from the improvement of routing efficiency, channel merging, and the growth of private channels.

In addition, Bitcoin Rollups and sidechains such as Stacks and Botanix are under development to improve scalability and transaction activity, and ultimately drive growth in Bitcoin transaction fee revenue. These solutions hope to improve the practicality of Bitcoin while ensuring the security of the main chain by introducing smart contracts, accelerating transaction speeds, and expanding new use cases.

It is worth noting that low-value transactions have increased on the Bitcoin network. Transactions with amounts less than $100 currently account for about 60%, and even reached 80% at certain times in 2024. Although the number of large transactions of $100,000-1 million has also increased, their share of overall transactions has decreased relatively.

Currently, Bitcoin blocks have continued to fill to their 4MB cap, despite relatively low mempool size and transaction counts. This suggests that block space is primarily being filled with low-value, low-fee transactions, with less competition, resulting in low average transaction fees, with only brief spikes when demand for Ordinals and Runes surges. In the future, if participation in high-value or time-sensitive transactions increases, it could strengthen transaction fee revenue, supporting miner incentives and offsetting the impact of reduced block rewards.

Bitcoin as a store of value and reserve asset

Although Bitcoin's transaction function is still being optimized, its role as a "store of value" is becoming more and more obvious. Its scarcity and predictable issuance mechanism have earned it the title of "digital gold". This trend has accelerated over the past few years, with rising holdings by institutional investors, public offerings, ETFs, and even national entities, who now collectively hold more than 14% of the Bitcoin supply.

On-chain data also supports Bitcoin’s shift toward long-term holdings. Decreasing liquidity of Bitcoin supply, i.e., a decrease in the ratio of adjusted transfer volume to current supply, suggests that BTC is more likely to be held for the long term than frequently traded.

In addition, HODL Waves (Bitcoin Holding Time Distribution) shows that the proportion of Bitcoin supply held for 1 year or more has risen to 63%, and this figure continues to grow, reflecting that Bitcoin is evolving into a long-term reserve asset.

Conclusion

As miners adapt to the reality of reduced block rewards, they are optimizing their operations through hardware upgrades, geographical migration, and diversified business. At the same time, the way Bitcoin is used is also evolving: low-value transactions and Layer-2 activities are growing, while long-term holding is becoming more and more dominant, further consolidating its role as a value storage tool.

How to balance Bitcoin's transaction function and store of value attributes will be the key to maintaining the long-term health of the network and the sustainability of the security economic model in the future.