The Weekly Hash, 1/20/21: It costs $4300 to mine 1 Bitcoin with S19 rigs at the average price of power in North America

Bitcoin gained 7.5% in a volatile week to reach $36,250 at midnight UTC on 1/19, but slipped to $34,900 in morning trading on the 20th. Meanwhile, Difficulty is on track to reset up 3–3.5% to another all-time high on Friday night / early Saturday EST, taking the target Hashrate to over 150EH/s for the first time. Total BTC earnings per PH/s are now ~6.75mBTC / PH/s, down from 7.18mBTC last week. (1mBTC or milliBTC = 1/1000 BTC.)

Increasing block count drove Transaction Fees (Tx fees) down 550 bps week-on-week (WoW) to 9.5% of miner rewards. We have observed a strong negative 69% correlation between daily blocks mined and Tx fees, as rising block count leads to less network congestion and shorter confirm times.

Bitcoin mining revenue increased to $244.5 / PH/s per day and $267/MWh, as price gains offset a moderation of BTC earnings led by declining Tx Fees.

The BitOoda North American Hash Spread™ edged up 1.1% WoW to $235, having peaked at $311 on 1/9.

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. EIA data shows a weighted average peak/off-peak U.S. wholesale industrial power price of $31.76 / MWh, leading to an aggregate spread of $235 across 8 power markets, which is 1.1% higher than last week.

Older generation S9-class devices saw their hash spread rise slightly to $43.4 / MWh. S17-class devices, the bulk of the current installed base, see a hash spread of about $164 / MWh.

With spreads so robust, capital investment payback periods are modest: We examine a hypothetical scenario of outfitting an existing building with power infrastructure and S19-class rigs for a 25MW project. Under our assumptions, it would take 180 days to the mine the first BTC with a $32mm investment. By day 398 (218 days of mining), the rig investment would be recovered, with an IRR of ~80% and a 524-day payback period including the long-lived power infrastructure.

We assume prices are static at $36,000 for the project duration, while difficulty could rise 6–8x before daily revenue dips below operating expenses. If price appreciates along with difficulty, returns would be healthier still, with shorter payback periods.

As difficulty has grown over time, it takes more power to produce a Bitcoin. Currently, it takes ~136 MWh to earn a Bitcoin using S19 rigs, including block rewards and transaction fees.

The price of Bitcoin is currently 8.4x the power cost to mine it using S19 rigs, based on the national average power price we use for the BitOoda Hash Spread™.

It currently costs $4300 to produce a Bitcoin using S19-class rigs at the average power price. With S17 rigs, the power bill would be $5,893 per Bitcoin, and $15,316 using S9 class rigs. The chart below shows the cost to mine 1 BTC today, as a function of the cost of power and rigs in use.

Takeaways

This is a great time to seek Bitcoin exposure through mining, and increasing liquidity in hedging products can help mitigate some of the risk, while allowing investors to acquire Bitcoin at a discount to the spot market.

Long-term price growth is supported by news flow surrounding accelerating fund allocations to the asset class. While investors need to navigate price and difficulty risk that can pose existential threats to unhedged mining operations, we are optimistic about the long-term outlook for well-capitalized, appropriately-hedged businesses.

Email us at to discuss how we can help manage your risk or gain exposure to the space.

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