Bitcoin Miner Signal: From Block to Stock Market

Source: On-Chain Mind, Compiled by Shaw Jinse Finance

When it comes to Bitcoin, miners are almost the most familiar insiders to us. Their reserves, income, and behavior not only reflect the operation of the network but often also indicate the direction of the market.

They are under constant economic pressure. How they manage funds, cash flow, and infrastructure reflects Bitcoin's potential health better than any chart.

In this article, we will analyze the signals currently being emitted by miners, the structural changes affecting the industry, and how these changes impact Bitcoin and mining stocks. Ignoring these signals means you will miss an important piece of the puzzle.

Key Overview

• Network Demand Cooling: The average block size of Bitcoin has decreased, indicating that despite the price reaching an all-time high, network activity is becoming subdued.
• Strong Miner Economy: Even after the halving, daily income remains at a high level over multiple cycles.
• Changes in Reserve Structure: Miners continue to distribute tokens rather than hoarding them, marking the industrialization of the industry.
• Stocks and Bitcoin: Mining stocks are highly correlated with Bitcoin, but are currently in an overbought state, making them a riskier alternative to directly holding Bitcoin.

Average Block Size

One of the most direct yet insightful indicators is the average block size, measured in megabytes (MB). It measures the amount of transaction data packed in each Bitcoin block.

Historically, the block size limit for Bitcoin was initially set at 1MB to prevent spam and ensure scalability, as introduced by Satoshi Nakamoto. However, later on, this limit was expanded in 2017 through Segregated Witness (SegWit), allowing for a maximum block size of up to 4MB under optimal conditions.

Currently, the average block size hovers around 1.5 MB. Despite Bitcoin reaching new price highs, this figure has slightly declined in recent months. This does not mean that Bitcoin is weakening—it merely reflects a temporary slowdown in demand for block space. Importantly, miners' profitability largely depends on transaction fees, and a decrease in block congestion will reduce their fee income.

The average block size provides a real-time snapshot of demand and fluctuates with price and mass market speculation.

This decline is not a warning sign for network integrity; rather, it indicates a temporary decrease in transaction throughput and network utilization.

This is the pulse of the Bitcoin economy - sometimes racing, sometimes steady.

Income: Resilience After Halving

The mechanism of halving every four years will reduce the block rewards, which always raises concerns about miners being forced to exit the market. However, history shows that miners are able to adapt — the recent halving is no exception.

Currently, miners' total daily revenue is about 55 million dollars, a level that was only surpassed briefly during the peak of the bull market in 2021 and when it soared to 70,000 dollars just before the most recent halving.

After the halving in April 2024, many expect a tightening of income. However, data shows that income is on the rise and has exceeded most levels of the previous cycle.

The resilience of mining is very important because:

• This indicates that despite the reduction in issuance, the network remains secure.
• High income supports reinvestment in infrastructure and scale expansion.
• The strong economic benefits for miners provide confidence for the continued growth of computing power (and security).

In short, halving has not weakened the power of miners, but rather strengthened the economic pillar of Bitcoin.

Reserves: From Long-term Holders to Enterprises

In 2019, miners held a total of over 2.5 million BTC. Today, that number has dropped to 1.8 million, with no signs of a reversal.

This long-term reduction tells a story of transformation:

• Early: Miners typically behave like investors, hoarding cryptocurrencies as speculative assets.
• Now: Mining has been industrialized. Operators continue to sell cryptocurrency to maintain operations, reinvest, and manage cash flow.

By gradually distributing tokens, miners can avoid "panic selling"—a sudden flood leading to a price crash. It promotes organic price discovery, relying on a diverse range of investors rather than a concentrated group.

At first glance, the ongoing sell-off seems bearish. But in reality, this is a positive development:

• It can prevent miners from collectively dumping reserves, which would trigger a sudden "supply shock."
• This means that the price discovery of Bitcoin no longer relies on miners, but rather depends more on widespread market demand.

The decline in the reserves held by miners reflects an increasingly mature ecosystem—one in which miners play the role of infrastructure providers rather than speculators.

Surrender Risk Pressure Level

In the Bitcoin space, nothing is more important than whether miners are forced to sell their Bitcoins. To track this situation, we use the "Miner Surrender Risk Indicator" to compare the short-term (30 days) and long-term (60 days) average hash rates.

• Green area = stable miners, lower risk of large-scale sell-offs.
• Red Area = Miners under pressure, with a higher likelihood of surrender.

Historically, the green zones have been the best positions for accumulation. Although they are not predictive, they often help to reduce downside risk.

Currently, the indicator is deep green. This is important because:

• This indicates that the miners are in good financial condition and are unlikely to sell their held assets.
• Historically, such periods often herald strong rebounds due to minimal supply pressure.
• Since May 2023, a strong bullish trend has followed every low-risk reading.

This indicator is one of the clearest windows to observe the internal health of Bitcoin. And now, it indicates: Market conditions are stable.

Mining Stocks: A Higher Risk Alternative

Publicly traded mining stocks—such as Marathon, Riot, and Hive—offer investors an indirect way to invest in Bitcoin. But how do they actually perform?

The correlation indicator for mining stocks tracks the degree of association between these stocks and the price of Bitcoin. Currently, the correlation is very high — this means that the movement of mining stocks is almost in sync with that of Bitcoin.

Mining stocks are mostly correlated with Bitcoin, and the real advantage comes from making wise trades in those rare red zones.

This is important because:

• The function of mining stocks is similar to leveraged exposure to Bitcoin, which can amplify both gains and losses, but it is not exactly the same.
• In most meaningful time frames, the performance of miner stocks is inferior to Bitcoin itself.
• Unless you have a clear advantage, holding a large investment in mining companies will increase volatility without sustained exceptional performance.

Personally, I would not allocate more than 5% of my portfolio to mining stocks. This is merely a tactical investment operation and not a core holding. The benchmark will always be Bitcoin.

Mining Stock RSI

To measure stock momentum, we can look at the relative strength index of mining stocks (RSI).

• Above/Below 50 = Bullish/Bearish trend.
• Above 75 = Overbought.
• Below 35 = Oversold.

The RSI indicates that even if Bitcoin rises, a pullback may occur due to overvaluation.

Currently, the RSI value of mining stocks (on average) has reached the highest level since I started tracking it in early 2024. This is a double-edged sword:

• On one hand, it confirms the extremely bullish momentum.
• On the other hand, it warns that the industry has already over-expanded and is susceptible to short-term pullbacks.

Even if Bitcoin rises further, mining stocks may perform poorly simply because they have already risen too far too quickly. To me, this means one should remain cautious.

Summary

Looking back at the data, we can see that the presented picture is remarkably consistent. Network activity has slightly cooled down, but miner income remains strong. At the same time, the way miners manage their reserves indicates that the industry has matured - they no longer hoard Bitcoin in hopes of future profits, but operate like legitimate businesses, steadily selling to support business growth and cover costs. This shift is healthy; it eliminates the risk of sudden supply shocks and leads Bitcoin price discovery to rely more on organic demand.

In my opinion, the most encouraging signal is that the surrender risk is relatively low. Miners are stable and profitable, and they are not facing significant selling pressure, which provides a positive backdrop for Bitcoin itself. However, when it comes to mining stocks, I remain cautious. They typically fluctuate in sync with Bitcoin prices, and currently, they have become overheated, making them a higher-risk alternative to directly holding Bitcoin itself.

The lesson is simple for me: Bitcoin is the benchmark. Mining stocks may offer tactical gains, but their volatility and poor long-term performance mean they can only ever be a supporting role in my portfolio.