Fidelity Digital Assets is pushing back on a central criticism of Bitcoin’s long-term security: that falling block rewards from repeated halvings will eventually weaken incentives for miners and make sustained attacks more feasible. In a new research report, Fidelity argues that Bitcoin’s economic model is broader than issuance alone and that the network’s security can remain robust even as subsidies decline.

The report, authored by Fidelity research analyst Daniel Gray, reiterates that transaction fees and other market incentives help miners maintain profitability and continue contributing hash power. The debate matters to investors and builders because Bitcoin’s fixed issuance schedule steadily reduces new coin supply until the block subsidy disappears—leaving the question of whether fees and incentives will fully replace that funding over time.

Key takeaways

• Fidelity argues Bitcoin’s security relies on multiple economic forces, not just block rewards.
• Gray cites historical miner incentives strengthening alongside Bitcoin’s price, despite declining issuance across halving cycles.
• Miners still face intense near-term financial pressure, even as the long-term security narrative remains contested.
• Publicly traded miners’ shift toward AI and high-performance computing highlights costs and operational demands that differ from typical mining setups.

Why Fidelity says halving won’t automatically erode security

One of the most persistent concerns around Bitcoin’s programmed supply is that each quadrennial halving reduces the block subsidy that miners earn. Critics contend that, over the long run, declining issuance could lower miner revenue and weaken incentives—unless transaction fees rise enough to compensate for the reduction.

Fidelity’s new analysis challenges that framing by arguing that block rewards are only one part of the security equation. According to the report, miners are also supported by transaction fees and by broader market incentives that keep attacks economically unattractive. Put simply, the network does not depend solely on how many new coins are created per block; it depends on whether miners can still justify securing the chain in the face of costs and risk.

Fidelity’s report also engages with the larger timeline investors watch: Bitcoin’s issuance schedule reduces new supply gradually, and eventually the block subsidy will reach zero. That future transition is why the fee-versus-subsidy question remains central for developers, economists, and market participants.

Miner revenue and incentives across halving cycles

Fidelity points to data showing that miner revenue has risen substantially over time, rather than weakening in line with reduced subsidies. Gray notes that since April 20, 2024, miners have been receiving a subsidy of 3.125 BTC per block—down from 6.25 BTC during the prior halving cycle.

In the report, Gray argues that lower issuance hasn’t translated into weaker incentives because Bitcoin’s rising price has more than offset the decline in block rewards. He also highlights the growth in average daily miner revenue, which he says increased from roughly $26,300 during Bitcoin’s first halving cycle to more than $40.2 million at present.

“Despite declining issuance, miner incentives — and by extension, network security — historically strengthened alongside Bitcoin’s price,” Gray writes. The underlying implication is that if miners continue to capture enough value from the combination of price, fees, and other economic dynamics, the network’s security budget can remain sufficient even as subsidy-based income shrinks.

Fidelity’s argument is particularly relevant for readers who view halvings as deterministic security “stress tests.” Instead of treating reduced issuance as an automatic negative, the report frames miner incentives as a responsive system that has historically adapted when the asset price and fee environment improve.

The security debate versus miners’ real-world financial strain

While Fidelity emphasizes long-term economic resilience, the same period has also exposed serious near-term pressures for many mining firms—especially those operating as public companies. Industry commentary cited in connection with the report describes the current environment as among the most difficult on record, pointing to a combination of lower mining rewards, rising costs, and increasing competition.

That gap between long-term theory and short-term operating reality is where the industry’s behavior becomes important to watch. The source material notes that some miners have diversified into artificial intelligence and high-performance computing, using existing power infrastructure and data center assets to pursue demand from AI workloads instead of relying solely on Bitcoin mining.

In this context, an earlier Cointelegraph report referenced a VanEck estimate suggesting publicly traded miners could require up to $50 billion in additional capital to fully transition to AI infrastructure. The scale of that estimate underscores why many mining companies are making strategic pivots now: even if long-term Bitcoin security remains intact, the companies themselves may need liquidity and capital to remain competitive and operationally flexible.

Why “AI pivot” operations are harder than mining

One reason the pivot to AI and HPC is costly—and not simply a rebranding of mining—is that uptime, reliability, and facility requirements differ from typical mining setups. A quote attributed to Blocksbridge Consulting in the source material contrasts the two environments: a Bitcoin mine, the publication notes, can run with relatively simpler infrastructure and ASIC fleets that can tolerate faster curtailment. AI and HPC facilities, by contrast, require higher standards for continuous operation.

According to the same source, AI and HPC deployments demand greater electrical redundancy, improved cooling, tighter network requirements, and more responsive customer support—factors that add both engineering complexity and capital intensity.

This operational reality can matter for investors and analysts trying to interpret miner behavior. If mining economics remain uncertain on a quarter-to-quarter basis, firms may pursue non-Bitcoin revenue streams not because Bitcoin’s security thesis is wrong, but because maintaining balance sheets and meeting facility requirements in adjacent markets can be just as challenging as competing on hash rate.

Looking ahead: the fee question remains the test

Fidelity’s report argues that Bitcoin can stay secure even as issuance falls, but the broader market will still be watching the transition from subsidy-led revenue to fee-led revenue. The most important near-term signals are how transaction fee levels evolve relative to miner costs, and whether miners’ financial restructuring efforts can be sustained without undermining their ability to keep contributing to network security.

Fidelity Digital Assets has pushed back on worries that Bitcoin’s security will weaken as block subsidies shrink through future halvings. In a research report authored by Daniel Gray, Fidelity argues that Bitcoin’s long-term protection is supported by a broader set of economic incentives beyond new coin issuance—particularly transaction fees and the costliness of mounting sustained attacks.

The debate matters because Bitcoin’s issuance schedule mechanically reduces the block reward every four years, eventually turning the network into one primarily funded by fees. Critics have long argued that if transaction fees fail to rise enough to replace falling subsidies, miners’ incentives could weaken and the security budget for the chain could erode.

Key takeaways

• Fidelity says Bitcoin’s security depends on more than block rewards, emphasizing transaction fees and broader incentives that make attacks prohibitively expensive.
• Gray highlights that miner incentives have historically strengthened alongside Bitcoin’s price, even as issuance falls across halving cycles.
• Since the April 20, 2024 halving, the block subsidy is 3.125 BTC per block, down from 6.25 BTC previously.
• Average daily miner revenue has increased across cycles—from about $26,300 early in the prior halving era to more than $40.2 million today, according to the report.
• Despite Fidelity’s long-term view, publicly traded miners still face near-term funding and operational pressures, contributing to an AI and HPC shift.

Fidelity’s argument: security isn’t only about subsidies

Fidelity’s report challenges a core criticism of Bitcoin’s halving design: that each quadrennial cut reduces miners’ income and could ultimately impair the network’s ability to sustain high levels of mining participation. The concern typically centers on the idea that lower block rewards must eventually be offset by higher transaction fees—or else miners’ profitability could drop to a level that discourages security spending.

Gray’s conclusion is that this framing understates how Bitcoin’s incentive system works in practice. According to Fidelity, the network is not secured by issuance alone. Transaction fees, market dynamics, and other economic forces can keep miners motivated to invest in and maintain the infrastructure needed to protect the blockchain.

In other words, the report argues that declining subsidies do not automatically translate into declining incentives. If the total revenue miners earn—issuance plus fees—holds up or grows, then the security that depends on miners’ willingness to keep operating remains supported.

The post-halving revenue picture

Fidelity anchors its case in the latest halving mechanics and the observed changes in miner income. Since April 20, 2024, Bitcoin miners have received a subsidy of 3.125 BTC per block, compared with 6.25 BTC during the prior cycle.

Gray argues that the reduction in issuance has not weakened miner incentives, largely because Bitcoin’s market price has risen enough to more than compensate. Fidelity points to growth in average daily miner revenue, stating it increased from roughly $26,300 during Bitcoin’s first halving cycle to more than $40.2 million at present.

“Despite declining issuance, miner incentives — and by extension, network security — historically strengthened alongside Bitcoin’s price,” Gray wrote, according to the report.

This is a meaningful distinction for investors and builders: it implies the pathway from subsidies to fee-based security may be less abrupt than critics assume. Instead of treating the halving as an immediate security stress test, Fidelity frames the outcome as dependent on how fees and market conditions evolve relative to the declining reward schedule.

Why transaction fees are central—and why uncertainty remains

Even with Fidelity’s argument, the question of how Bitcoin transitions to fee-led security is still the focal point of long-term risk analysis. The network’s supply schedule is fixed, meaning new issuance will continue to shrink until it eventually disappears. The open uncertainty is whether transaction fees, in combination with other economic forces, will reliably sustain miner incentives through that transition.

Fidelity’s report does not remove that uncertainty; it addresses the claim that halving alone inevitably damages security incentives. By pointing to historical patterns—where miner incentives rose despite declining issuance across previous halving cycles—the report suggests the market has previously adjusted in ways that preserved or strengthened miner profitability.

For readers, the practical takeaway is that monitoring should extend beyond the headline halving reward. The combination of fee levels, total miner revenue, and the broader price trend will likely be more informative indicators of whether security spending remains well supported over time.

Near-term pressure for miners: AI and HPC expansion

While Fidelity frames Bitcoin’s long-term security economics as resilient, the near-term reality for many publicly traded miners has been more difficult. Multiple analysts and industry narratives cited in the broader coverage describe a challenging environment shaped by reduced mining rewards, higher costs, and intense competition.

That pressure has helped drive diversification strategies. Some miners have moved toward artificial intelligence and high-performance computing, leveraging existing power infrastructure and data center assets rather than relying only on Bitcoin mining revenues.

Earlier coverage referenced in the article noted that several miners have been pursuing these alternatives, including a shift towards AI-oriented infrastructure. Separately, a report by VanEck estimated publicly traded miners could require up to $50 billion in additional capital to fully transition to AI infrastructure—an illustration of how large the investment hurdle can be when expanding beyond crypto mining.

Blocksbridge Consulting, quoted in a Miner Weekly publication, highlighted operational differences that matter for business planning: it argued that Bitcoin mining can often be supported with modular infrastructure and ASIC fleets that tolerate fast curtailment, while AI and HPC facilities require higher standards for uptime, cooling, redundancy, networking, and customer support.

This creates an asymmetry investors should pay attention to. Even if Bitcoin’s security budget holds up in the long run, individual mining companies may still face financing constraints and execution risk while they adapt to changing economics and technology demands.

Readers should watch how miners balance these two tracks—supporting Bitcoin’s security today while making capital-heavy bets on future revenue streams. The timing of that pivot, and the ability to raise funds without impairing balance sheets, may become an increasingly important variable for equity holders as the industry continues adjusting to post-halving economics.

TLDR:

• XRP long liquidations surged 832% over the past week, reaching nearly $3.0 million in forced exits.
• Open Interest dropped from $1.18B to $1.04B, reflecting an 11.1% monthly decline in leveraged exposure.
• Binance XRP reserves fell just 0.35% weekly, showing spot holders remained calm amid futures turmoil.
• A Tom DeMark “9” buy signal and Morning Star Doji pattern suggest XRP could rebound toward $1.30.

XRP derivatives markets recorded a sharp deleveraging episode over the past week, with long liquidations surging 832% versus the prior month.

Open Interest fell from roughly $1.18 billion to approximately $1.04 billion. Funding rates turned deeply negative, registering a -463% shift against the quarterly baseline.

The data points to a forced exit of leveraged long positions rather than an orderly rollover, resetting the market’s overall risk structure.

Cascading Liquidations Clear Speculative Excess From XRP Futures

Long liquidations reached nearly $3.0 million over the seven-day period, far outpacing short liquidations. This imbalance confirms that upside-positioned traders bore the brunt of the selloff. The scale of exits reflects a systematic purge rather than isolated margin calls across the derivatives market.

Open Interest declining by 11.1% on a monthly basis reinforces this interpretation. When OI falls alongside deeply negative funding rates, it typically means leveraged longs are being closed, not transferred. The market is shedding speculative weight accumulated during the prior uptrend.

Source: CryptoQuant

Despite the futures turmoil, spot-side behavior told a different story. Binance XRP reserves remained relatively stable, down just 0.35% on the week.

That restraint among holders suggests limited appetite to deposit tokens for immediate sale, even as price weakened noticeably.

The divergence between panicked futures positioning and composed spot holders is notable. Historically, this kind of split often marks a transitional phase rather than an outright bearish continuation. Whether that transition resolves bullishly depends on how sellers respond next.

Technical Signals and Utility Developments Add Context to XRP’s Next Move

On the technical side, analyst Ali Charts flagged two reversal patterns forming on the daily chart. The Tom DeMark Sequential printed a “9” buy signal, which historically anticipates a one-to-four candle relief rebound.

Additionally, the past three sessions completed a Morning Star Doji formation, a pattern traditionally associated with localized price bottoms.

Ali Charts noted that if buying volume accelerates, XRP could move toward the $1.30 level from current prices near $1.05.

These signals do not guarantee a sustained trend change, but they do indicate potential short-term momentum shifts worth watching.

On the fundamental side, Ripple’s launch of RLUSD in Japan through SBI VC Trust adds a longer-range utility layer to the XRP ecosystem.

Stablecoin infrastructure tied to regulated partners in a major market could support broader adoption over time.

The immediate focus, however, remains on Open Interest recovery. A rebound in OI alongside normalizing funding rates would confirm that fresh demand is entering the market.

Until that happens, the question is whether short-sellers press their advantage or negative funding triggers a short-covering rally.

Fidelity Digital Assets has pushed back against concerns that Bitcoin’s long-term security will deteriorate as mining rewards decline, arguing in a new research report that the network’s economic incentives remain sufficient to secure the blockchain over time.

The report, authored by Fidelity research analyst Daniel Gray, reiterated the view that Bitcoin’s security depends on more than block rewards. Transaction fees, market incentives and other economic forces continue to encourage miners to secure the network and make sustained attacks prohibitively expensive, it said.

The findings challenge a longstanding criticism that each quadrennial halving weakens Bitcoin’s security by reducing the issuance of new coins. Critics argue that declining block rewards could eventually erode miners’ incentives unless transaction fees grow enough to offset the shortfall.

The issue has become one of the most closely watched long-term questions surrounding Bitcoin (BTC), whose fixed supply schedule gradually reduces new issuance until block subsidies eventually disappear. Whether transaction fees and other incentives can sustain network security remains a central debate among developers and market participants.

Since April 20, 2024, Bitcoin miners have received a subsidy of 3.125 BTC for each block they mine, down from 6.25 BTC during the previous halving cycle. However, Gray argued that lower issuance has not translated into weaker incentives for miners because Bitcoin’s rising price has more than offset the decline in block rewards.

He pointed to the growth in average daily miner revenue, which increased from roughly $26,300 during Bitcoin’s first halving cycle to more than $40.2 million today. “Despite declining issuance, miner incentives — and by extension, network security — historically strengthened alongside Bitcoin’s price,” Gray wrote.

Bitcoin’s average daily miner revenue has increased substantially across halving cycles. Source: Fidelity Digital Assets

Related: Nvidia’s $20 billion debt boom reinforces Bitcoin miners’ AI pivot

Public Bitcoin miners face mounting financial pressure

While Fidelity argues that Bitcoin’s long-term incentive structure remains intact, many publicly traded mining companies continue to face near-term financial pressure. Some industry analysts have described the current environment as one of the most challenging on record, citing lower mining rewards, rising costs and growing competition.

In response, several miners have diversified into artificial intelligence and high-performance computing, leveraging existing power infrastructure and data center assets to meet growing demand for AI workloads rather than relying solely on Bitcoin mining.

A recent report by VanEck estimated that publicly traded miners could require up to $50 billion in additional capital to fully transition to AI infrastructure, underscoring the scale and cost of the shift.

Public miners face a large funding gap in realizing their AI ambitions. Source: Miner Weekly

“A Bitcoin mine can run with relatively simple buildings, modular infrastructure and ASIC fleets that tolerate fast curtailment,” Blocksbridge Consulting wrote in a recent Miner Weekly publication. “AI and HPC facilities require higher standards for uptime, cooling, electrical redundancy, networking and customer support.” 

Related: Crypto Biz: Is AI the exit strategy for miners?

Digital Currency Group-backed investment firm Yuma has launched the Yuma Total Market Fund, a pooled product designed to give institutional investors diversified exposure to the Bittensor ecosystem—without requiring them to pick individual subnet tokens.

Announced on Thursday, the fund is structured to provide exposure to Bittensor’s native TAO token alongside a basket of AI-focused subnets. Yuma says the aim is to package participation in Bittensor’s decentralized AI infrastructure economy into a single vehicle, with seed capital provided by an undisclosed anchor investor.

Key takeaways

• Yuma’s new fund targets broad exposure to Bittensor via TAO plus a basket of AI subnet assets in one pooled strategy.
• The firm positions the approach as simpler than selecting and managing individual subnet tokens directly.
• Network “subnet value” figures vary materially depending on the tracker used—Yuma cites $900M+ across 128 subnets, while Taostats points to roughly $300M.
• Institutional interest in Bittensor-linked assets has been rising, reflected in Grayscale’s evolving TAO weighting and filings for TAO exchange-traded products.
• Renewed attention to decentralized AI follows US Commerce Department actions impacting access to Anthropic models, underscoring the debate over reliance on centralized providers.

A fund built around Bittensor’s subnet economy

Bittensor is a decentralized network for building AI infrastructure and applications, operating through specialized subnets. These subnets focus on different areas such as compute, marketplaces, and identity. Rather than betting solely on the performance of TAO as a single token, Yuma’s strategy blends exposure to TAO with additional subnet-related assets.

According to Yuma, Bittensor’s 128 subnets collectively represent more than $900 million in combined value. However, data from network tracker Taostats suggests a lower combined subnet value—closer to $300 million. For investors, this gap matters because the “size” of the subnet economy can be measured differently depending on the methodology behind network trackers, and those assumptions influence how meaningful “diversification across subnets” really is.

Yuma did not disclose the anchor investor that provided seed capital. Still, the launch signals a shift in how asset managers are structuring access to decentralized AI systems: instead of treating Bittensor as a single-token theme, they are increasingly packaging it as an ecosystem.

How institutional allocations are changing for TAO

Institutional exposure to Bittensor-linked assets has broadened alongside the network’s expanding subnet economy, and TAO allocations within established funds offer a window into how managers are rebalancing their decentralized AI theses.

In April, Grayscale increased TAO’s weighting in its Grayscale Decentralized AI Fund to 43% during the fund’s quarterly rebalance. Since then, TAO’s allocation has fallen to about 20%, while Near Protocol’s NEAR has become the largest holding at roughly 44%.

That evolution highlights a familiar dynamic in crypto asset management: even when a thesis is “decentralized AI,” the portfolio can still rotate as managers weigh relative opportunities across tokens they view as part of the same broader category. For readers, it suggests that TAO may remain central to decentralized AI exposure, but it is not immune to shifting portfolio construction as other ecosystem players gain weight.

ETF momentum: filings for TAO exposure

Beyond private funds, the push to bring TAO exposure into more traditional investment wrappers is also accelerating. Asset managers have been filing with US regulators to create exchange-traded products tied to Bittensor.

In April, Bitwise filed for a TAO Strategy ETF with the US Securities and Exchange Commission (SEC). Grayscale, meanwhile, submitted an amended registration statement aimed at converting its existing Bittensor Trust into a spot TAO exchange-traded fund that would be listed on NYSE Arca, if approved.

These filings reflect growing demand from investors who want exposure to decentralized AI through regulated market infrastructure. If regulators approve spot TAO structures, it could reduce friction for institutional allocators who prefer standardized instruments over bespoke crypto holdings.

Why decentralized AI is back in focus

The interest in Bittensor’s model is occurring amid renewed scrutiny of centralized AI access. The case for decentralized AI—where AI infrastructure and computing are distributed across blockchain-based networks rather than relying on a single provider—has gained traction after the US Commerce Department suspended public access to Anthropic’s Fable 5 and Mythos 5 models over national security and export control concerns.

Grayscale head of research Zach Pandl argued that the restrictions underscored the risks of centralized control of AI. According to Pandl, investors may seek alternatives such as Bittensor and its TAO token as they look for ways to avoid single-provider chokepoints.

While the restrictions initially tightened, the situation appears to be easing. The Commerce Department restored access to Mythos 5 on Friday, and Axios reported Saturday that the Trump administration is expected to allow Anthropic to resume public access to Fable 5 as soon as next week.

Even if access returns quickly, the episode has already reframed parts of the conversation around decentralized AI. For market participants, it raises a practical question: are investors buying “decentralized AI” as a speculative crypto theme, or as a hedge against policy-driven disruptions that can affect availability and control of AI models?

What to watch next

With Yuma’s fund now live and multiple managers pursuing TAO-linked ETF pathways, the next signal to monitor is how these products structure their exposure to TAO versus subnet baskets—and whether regulatory outcomes for spot listings translate into broader institutional demand for Bittensor ecosystem exposure.