Asia Morning Briefing: Surge in Bitcoin ETFs Squeezes Network Fees, Deepening Miner Losses

Bitcoin Near Record Highs, but On-Chain Activity Slumps as ETFs Soak Up Liquidity

While Bitcoin trades near all-time highs, its underlying network activity is telling a different story. Capital is flooding into spot ETFs and custodial products, while retail users shift to alternative chains—leaving Bitcoin’s on-chain demand stagnant and miner revenues under pressure.

Data from Glassnode shows that transaction fees on the Bitcoin network have dropped back to near decade lows, despite BTC hovering close to the six-figure mark. Unlike previous bull markets—where rising prices coincided with fee spikes and network congestion—this rally has left the chain quiet.

A new report from Galaxy Research shows median daily fees have declined by over 80% since April 2024. Around 15% of daily blocks now clear at just 1 satoshi per vbyte, and nearly half of all blocks are underutilized—clear signs of weak demand and a dormant mempool.

This reflects a broader shift in market structure. Spot Bitcoin ETFs and custodians now hold over 1.3 million BTC, effectively sidelining those coins from on-chain activity. As a result, the network’s usage no longer reflects broader market enthusiasm.

At the same time, retail traffic has migrated to faster, cheaper chains like Solana, where NFTs and memecoins offer more accessible participation. As Galaxy notes, BTC price is now increasingly driven by custodial inflows rather than organic blockchain activity.

This decoupling is particularly challenging for miners. With block rewards halved to 3.125 BTC earlier this year and fee contributions dropping to under 1% of block revenue in July, profitability is under growing pressure. In response, many publicly traded miners are pivoting toward artificial intelligence (AI) infrastructure and high-performance computing (HPC) services to diversify revenue streams.

Bitcoin may be thriving in traditional markets, but the quiet on-chain suggests the network’s underlying dynamics are evolving—and not necessarily in favor of long-term sustainability without a renewed source of transactional demand.