The Weekly Hash, 11/30/21: Year-end Hashrate Likely To Be ~180 EH/s

Bitcoin gained 2.7% week-on-week (WoW) to $57,920 as of midnight UTC on 11/29. Sunday’s difficulty adjustment saw a decrease of 1.49%, equivalent to a target Hashrate of 159.8 EH/s. The ProShares BITO ETF trails BTC by 2.2% since fund inception; the fund launch correlates strongly with increased CME open interest, as AUM increased rapidly in the first week from launch. Click here for the full report.

Contango on the CME has remained mostly flat vs. a week ago, and current open interest fell 8.1% WoW to 13,201 lots. The Commitment of Traders data from 11/23 shows a large increase in non-reportable shorts, roughly 3 times that of 11/16, while leveraged managers increased their long and decreased their short positions. The net length on the CME is now short 729 lots for non-commercial players (the YTD minimum), from short 357 lots the prior week.

Total BTC earnings per PH/s are ~5.70 mBTC, up from ~5.63 mBTC / PH/s last week on the recent reset increasing earnings slightly (1mBTC or milliBTC = 1/1000 BTC). Transaction fees dropped 17 bps WoW to 1.2% of miner rewards, or 0.08 BTC per block. The “Mempool” shows low congestion levels, with ~2,500 pending transactions. We continue to assess congestion will likely stay low for awhile with the falloff of trading activity in Asia, where a higher percentage of on-exchange transactions result in on-chain transactions.

Bitcoin mining revenue gained to $330 / PH/s per day and $360/MWh owing to the decrease in difficulty. Miner economics are on track to come in modestly better than our previous year-end estimate, as it is unlikely that we will see ~30 EH/s come online in the next month. The current block rate suggests that the actual year-end Hashrate will fall short of our prior 198EH/s forecast, and will likely be closer to 180EH/s.

The BitOoda North American Hash Spread™ rose 3.8% from $295 to $307 as spot gains outweighed the power price increase.

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 $53.27 / MWh leads to an aggregate spread of $307.

Older-gen S9-class devices saw their Hash Spread™ up ~3% to $73/MWh. S17-class devices, the bulk of the installed base, saw a hash spread of about $174/ MWh.

It now takes 160 MWh to mine 1 BTC using S19-class rigs, while S17-class machines would consume 255 MWh, and S9-class, 457 MWh. This translates into $8,566 in power expense to mine 1 BTC with S19 class rigs, and $24,340 using S9 rigs, a ~58% contribution margin, excluding labor.

Takeaways

Despite a declining Bitcoin price over the last two weeks, mining presents very attractive margins with a likely 10% downside to our prior 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

Net length worsened to short 729 lots, a YTD low, while leveraged traders appear to be shifting slightly long and non-reportable shorts increased by 300%

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A boutique digital asset investment bank focused on providing innovative and compliant capital markets solutions for institutional clients.