The Weekly Hash, 11/22/21: Modest Downside Risk to Our 198EH/s YE Hashrate Est, Open Interest Rises Despite Price Drop

Bitcoin fell 9.2% week-on-week (WoW), settling at $59,032 as of midnight UTC on 11/21, and is down further to $57,500 intraday. Bitcoin modestly outperformed the $1.4B ProShares BITO ETF since fund inception; the fund launch correlates strongly with increased CME open interest as AUM increased rapidly in the first week from launch. Please click here for the full report.

Contango on the CME has moderated vs. a week ago, and open interest increased 4.3% WoW to 14,360 lots. The Commitment of Traders data from 11/16 shows an overall increase in spreading positions, while leveraged managers reduced their long and short positions. The net length on the CME is now short 357 lots for non-commercial players as of 11/16, from short 421 lots on 11/9.

Total BTC earnings per PH/s are ~5.61 mBTC, down from ~5.65 mBTC / PH/s last week on yesterday’s block count of 132, falling behind the expected count of 144 (1mBTC or milliBTC = 1/1000 BTC). Transaction fees gained 20 bps WoW to 1.1% of miner rewards, or 0.07 BTC per block. The “Mempool” currently shows low congestion, with ~5,000 pending transactions. We continue to assess congestion will likely stay low for a while with the falloff of trading activity in Asia, where a higher percentage of on-exchange transactions result in on-chain transactions.

Bitcoin mining revenue dropped to $331 / PH/s per day and $361/MWh on spot losses. However, miner economics remain on track to match or come in slightly better than our year-end estimate. Actual Hashrate is within our confidence intervals, and we are leaving our estimates unchanged for now. We continue to model 198EH/s as our year-end target Hashrate, although the current block rate suggests some downside is likely.

The BitOoda North American Hash Spread™ fell 8.6% from $350 to $320, as the impact of bitcoin price falling was dampened by a $10 / MWh decrease in power price.

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 $40.76 / MWh leads to an aggregate spread of $320.

Older-gen S9-class devices saw their Hash Spread™ down ~5% to $86/MWh. S17-class devices, the bulk of the installed base, saw a hash spread of about $187/ MWh.

It now takes 163 MWh to mine 1 BTC using S19-class rigs, while S17-class machines consume 259 MWh, and S9-class, 465 MWh. This translates to $6,665 in power expense to mine 1 BTC with S19 class rigs, and ~$19,000 with S9 class rigs, a 68% contribution margin excluding labor.

Takeaways

•Despite a 9% WoW drop in Bitcoin price, mining presents very attractive margins with likely downside to our 198EH/s YE Hashrate estimate

•The financial ecosystem connecting Bitcoin to traditional markets continues to evolve, with the Bitcoin Futures ETF driving CME volumes and open interest

•We expect significant CME volumes in the next two days as traders roll off November contracts ahead of the Thanksgiving holiday and Friday’s expiry

•Net length improved to short 357 lots, while leveraged traders appear to be shifting slightly to the sidelines