The Weekly Hash, 1/3/22: Miner Economics Normalizing, While Speculative Net Length on CME Improves to Short 39 Lots

Bitcoin dropped 6.8% week-on-week (WoW), settling at $47,352 as of midnight UTC on 1/2. Christmas day’s reset saw a minor difficulty increase of 0.32%, equivalent to a target Hashrate of ~174 EH/s. Over the past week, most bitcoin miners underperformed Bitcoin, with just Iris and Terawulf up in absolute terms. Click here for the full report.

The ProShares BITO ETF trails BTC by 2.1% since fund inception; the fund launch correlates strongly with increased CME open interest, as AUM increased rapidly in the first week from launch. Share count has held fairly steady since then at 40.1mm shares, indicating minimal fund flows, in or out.

The CME Futures curve has flattened all the way through June. Current open interest fell 13% WoW to 10,677 lots. The Commitment of Traders data from 12/21 shows that spreading positions increased, while commercial players reduced their longs. The non-commercial player net length on the CME is now short 39 lots, compared with short 257 lots two weeks prior and short 729 lots (the 2021 low) just before Thanksgiving (11/23).

Total BTC earnings per PH/s are ~5.23 mBTC, unchanged from last week’s (1mBTC or milliBTC = 1/1000 BTC). Transaction fees remain at 0.9% of miner rewards, or 0.06 BTC per block. The “Mempool” shows low congestion levels, with 3,473 pending transactions. We continue to assess congestion will likely stay low for a while.

Bitcoin mining revenue fell to $248 / PH/s per day and $270/MWh, owing to a lower BTC price, low Tx fees and modestly higher network Hashrate. Our YE 2022 Hashrate estimate remains 334EH/s, although we plan to update our network Hashrate forecasts shortly.

The BitOoda North American Hash Spread™ fell 10.0% from $265 to $239.

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 $31.10 / MWh leads to an aggregate spread of $239.

Older-gen S9-class devices saw their Hash Spread™ down ~18% to $64/MWh. S17-class devices, the bulk of the installed base, saw a hash spread of about $139/ MWh.

It now takes 175 MWh to mine 1 BTC using S19-class rigs, while S17-class machines would consume 279 MWh, and S9-class, 499 MWh. This translates into $5,452 in power expense to mine 1 BTC with S19 class rigs, and $15,492 using S9 rigs, a ~67% contribution margin, excluding labor.

Takeaways

•Mining margins are attractive, but are mean reverting

•Our current YE 2022 Hashrate estimate remains ~334 EH/s, which 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 just short 39 lots

•Overall, it is still a good time to be a miner, but the excess returns of the past few months continue to normalize