Miners and Validators On-Chain

7.1 The steady sellers

In Module 1, Chapter 9, Mint learned that miners and validators regularly sell some of their rewards to cover costs. "So they're like a company that pays its staff in stock, and the staff sell some every month," said Mint.

"Close enough," said Hash. "And because their activity happens on-chain, you can watch how much they earn, how much they hold, and when they're under pressure. When miners are struggling, it often tells you something about the market."

7.2 Bitcoin miner economics

Every day, Bitcoin produces roughly 144 blocks, one every 10 minutes. Since the 2024 halving, each block creates 3.125 new BTC (Module 1, Chapter 2).

Daily miner issuance (illustrative)	Value
Blocks per day	~144
New BTC per block	3.125
New BTC per day	~450
At $100,000 per BTC	~$45 million per day
Plus transaction fees	Varies with demand (Module 3, Chapter 3)

Miners spend heavily on electricity and hardware. Many must sell a significant portion of their rewards to pay those costs. That roughly 450 BTC a day of new supply is part of what the market has to absorb.

7.3 Hashrate and difficulty

Hashrate is the total computing power used for mining across the network. Higher hashrate means more security, because attacking the network would require more computing power (Module 3, Chapter 5).

Difficulty is how hard it is to find a valid block. Bitcoin adjusts difficulty about every two weeks (every 2,016 blocks) to keep blocks arriving roughly every 10 minutes. If hashrate rises, difficulty rises. If miners switch off, difficulty falls.

Rising hashrate generally signals that miners are investing in the network and expect mining to remain profitable. Falling hashrate can signal that some miners are switching off because it's no longer profitable.

7.4 Hashprice

Hashprice is the revenue miners earn for a given amount of computing power per day. It combines bitcoin's price, network difficulty, and transaction fees into one measure of mining profitability.

Change	Effect on hashprice
Bitcoin price rises	Up
Fees rise	Up
Difficulty rises (more competition)	Down
Halving	Sharply down, overnight

After each halving, hashprice drops sharply, because block rewards are cut in half while costs stay the same. Less efficient miners may become unprofitable and either upgrade, sell more coins, or shut down.

7.5 Miner flows and reserves

Analysts track coins held by addresses identified as belonging to miners, often called miner reserves, and flows from miners to exchanges.

Signal	Possible interpretation
Miner reserves growing	Miners holding rewards, possibly expecting higher prices or under less financial pressure
Miner reserves falling	Miners selling more than they earn
Large miner flows to exchanges	Possible selling pressure

Labelling miner addresses relies on identifying where block rewards are first paid, usually mining pools, and following the coins. As discussed in Chapter 2, this becomes less certain the further coins travel.

Many large miners are now public companies that also report holdings and sales in their financial statements, which can complement on-chain data.

7.6 Miner capitulation

Miner capitulation happens when mining becomes unprofitable for a significant share of miners, typically during a price decline or after a halving. Miners switch off machines, hashrate falls, and some sell reserves to survive.

A popular indicator, sometimes called hash ribbons, compares a short-term and a longer-term moving average of hashrate. When the short-term average falls below the long-term one, miners are capitulating. When it crosses back above, the capitulation may be ending.

Chapter 7 · Hash ribbons

A stylised hashrate chart over time with two lines: a solid 30-day moving average and a dashed 60-day moving average. Both rise until a halving, after which hashrate drops and the 30-day average falls below the 60-day average. That stretch is shaded as capitulation, with the gap between the lines filled. Later the 30-day average crosses back above the 60-day average, marked as the recovery cross, and both lines resume rising.

Historically, the end of miner capitulation periods has often coincided with attractive long-term buying opportunities, because the forced sellers have been flushed out. Like every signal in this series, it's historical evidence, not a guarantee.

"So when miners are in pain, it's often close to the bottom," said Mint.

"Often," said Hash. "Their selling is forced, not voluntary. When forced selling ends, a major source of supply disappears."

7.7 Validators and staking on Ethereum

On proof of stake networks, validators replace miners (Module 1, Chapter 4). Their on-chain activity tells a different story.

Metric	What it shows
Total ETH staked	How much supply is committed to securing the network
Staking ratio	Staked ETH as a share of total supply
Entry queue	ETH waiting to start staking; a long queue suggests strong demand to stake
Exit queue	ETH waiting to stop staking; a long queue can mean potential selling, though not always
Liquid staking share	How much staking runs through liquid staking protocols (the DeFi module)
Validator rewards	Yield from issuance, fees, and MEV (Module 3, Chapter 11)

Ethereum limits how quickly validators can enter and exit, so sudden large changes show up as queues. A long exit queue attracts attention, because exiting stakers could sell. But exits also happen for neutral reasons: switching staking providers, rebalancing, or restructuring after a staking service changes.

7.8 Issuance versus fees

Combining validator data with fee data (Module 3, Chapter 2) shows how Ethereum's supply is changing. When fees are high, more ETH is burned, offsetting issuance. When fees are low, net supply grows.

Network activity	Effect on ETH supply
High activity, high base fees	Burns may exceed issuance; supply can shrink
Low activity, low base fees	Issuance exceeds burns; supply grows

This connects on-chain data directly to the supply analysis in Module 5, Chapter 3.

7.9 Try it yourself

Find a chart of Bitcoin's hashrate and difficulty over the past two years, and mark the 2024 halving. What happened to hashrate in the months after it? Then find a hashprice chart and note how it changed.

For Ethereum, find the current total ETH staked, the staking ratio, and the length of the entry and exit queues. Then check whether ETH supply has grown or shrunk over the past year.

Key takeaways from this chapter

1. Bitcoin miners earn about 450 new BTC per day after the 2024 halving, plus fees, and sell part of it to cover costs.
2. Hashrate measures network computing power; difficulty adjusts about every two weeks to keep blocks near 10 minutes.
3. Hashprice combines price, difficulty, and fees into mining profitability, and drops sharply at halvings.
4. Miner reserves and miner flows to exchanges hint at selling pressure.
5. Miner capitulation, tracked through hashrate averages, has historically often marked market lows.
6. On Ethereum, staking totals, queues, and liquid staking share show validator behaviour.
7. Comparing issuance with fee burns shows whether ETH supply is growing or shrinking.