This working paper from the NUS Risk Management Institute (by Min Dai, Wei Jiang, Steven Kou, and Cong Qin) introduces a dynamic framework to study the supply side of Bitcoin mining. The authors analyze how miners’ selling decisions, Bitcoin inventories, and transaction fees are influenced by declining block rewards and shifting demand. Drawing from Hotelling's model of exhaustible resources, the paper explains real-world patterns in transaction fees, block sizes, and miner behavior—including why miners sometimes sell even when prices are low. It also highlights the changing balance between block rewards and transaction fees over time, offering insights into the long-term sustainability of Bitcoin mining.

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