The Weekly Hash, 1/10/22: Miner Economics Normalizing, While Speculative Net Length of 93 Lots Continues Improvement

BitOoda published our updated target Hashrate analysis last week for our subscribers, calling for 327EH/s by the end of 2022. This estimate is back-end loaded and depends in part on whether Bitcoin price and economics are supportive of this Hashrate. Click here for the full report.

Bitcoin dropped 11.5% week-on-week (WoW), settling at $41,886 as of midnight UTC on 1/9. The prospect of rising rates has weighed on equities and on risk assets in general, contributing to the overall crypto and crypto equity selloff.

The CME Futures curve is flat at the front but shows higher Contango beyond April, outside the liquidity window. Open interest rose 6.7% WoW to 11,297 lots, almost entirely in the active contract. The Commitment of Traders data from 1/4 shows that net length continues to improve from a 729 lot short in November, and is now long 93 lots.

Total BTC earnings per PH/s are ~5.2 mBTC, down from ~5.23 mBTC / PH/s last week on Saturday’s 0.4% difficulty reset (1mBTC or milliBTC = 1/1000 BTC). Transaction fees dropped 7 bps WoW to 0.8% of miner rewards, or 0.05 BTC per block. The “Mempool” shows low congestion levels, with 4,317 pending transactions. We continue to assess congestion will stay low for awhile.
Bitcoin mining revenue fell to $218 / PH/s per day and $238/MWh, owing to the lower BTC price, low Tx fees and slight increase in target Hashrate to 174.4 EH/s. Block pace remains at par, around 144 blocks per day, suggesting that either most capacity is back online in Kazakhstan, or that other capacity coming online was sufficient to mostly offset any Kazakh disruptions — which would indicate Kazakh Hashrate was lower than expected, or that it was not all impacted by the unrest and especially the internet shutdown in Kazakhstan.

The BitOoda North American Hash Spread™ fell 13.5% from $238 to $207.

We define the BitOoda Hash Spread™ as the difference between the cost of power per MWh and the Bitcoin mining revenue per MWh. This gives miners a quick sense of the surplus generated by their business to cover personnel, overhead, depreciation, and profit. The weighted average around the clock U.S. wholesale industrial power price (5 markets) of $31.02 / MWh leads to an aggregate spread of $207.

Older-gen S9-class devices saw their Hash Spread™ down ~18% to $53/MWh. S17-class devices, the bulk of the installed base, saw a hash spread of about $119/ MWh.

It now takes 176 MWh to mine 1 BTC using S19-class rigs, while S17-class machines consume 280 MWh, and S9-class, 501 MWh.

This translates into $5,465 in power expense to mine 1 BTC with S19-class rigs, and $15,530 using S9 rigs, excluding labor.

Takeaways

•Mining margins are steadily mean reverting

•Our YE 2022 Hashrate estimate of 327 EH/s needs to be considered when evaluating investment opportunities in the space

•Unsurprisingly, as a leveraged play on Bitcoin, most miners continue to underperform Bitcoin

•CME Futures net length improved to long 93 lots

•Overall, the excess returns miners enjoyed over the past few months continue to normalize