The Weekly Hash, 12/07/20: Price outpaces Hashrate to drive ongoing strong mining economics
Bitcoin price gained 6.4% last week to reach $19,356, while network Hashrate fell 4.6% to 129.5EH/s. With Transaction Fees up 111bp to 5.2% of total miner rewards, total BTC earnings per PH/s are now ~6.92mBTC / PH/s, up slightly from 6.84mBTC last week. (1mBTC or milliBTC = 1/1000 BTC.)
Transaction Fees (Tx fees) edged up to 5.2% of miner rewards, up 111bps week-on-week (WoW). 136 blocks were mined yesterday and the network remains slightly behind expected blocks, but 163 blocks were mined in the past 24 hours. If this pace holds, difficulty could increase 2–5% at the next reset around Dec 13th.
Bitcoin mining revenue gained 7.6% per PH/s and per MWh this week, outpacing price growth because of the higher Tx Fees.
Bitcoin price ended at $19,356 as of midnight UTC on 12/6, up from $18,191 a week ago. Price has stayed relatively range-bound over the past several days after a large upward move on 11/30 took it to a high of $19,664. The large fluctuations in Hashrate (129.5 EH/s in the 24 hours ending at Midnight UTC on 12/6 vs. 155 EH/s in the prior 24 hours) appear to be driven by luck, and as such are less reliable. We continue to research methods to suppress the impact of luck on daily estimates of observed Hashrate and get closer to the underlying, unobservable “true” Hashrate.
Daily revenue per PH/s gained $9.5 / day to $134 vs. a week ago. Daily revenue per MWh is over $146 using the latest-generation S19-class rigs, up $10 from $136 on 11/30. Our power consumption estimate is still about 7GW (though that is susceptible to mining luck and errors in estimating equipment mix based on conversations with miners and suppliers).
The BitOoda North American Hash Spread™ rose 4.5% WoW to $112.
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 $34.57 / MWh, leading to an aggregate spread of $112 across 8 power markets, which is ~$5 higher than 11/30.
Older generation S9-class devices saw their hash spread climb 15% WoW to $6.61 / MWh. S17-class devices, the bulk of the current installed base, see a hash spread of over $72 / MWh.
Hash Spreads™ are driven by BTC price, Difficulty, and Power prices. The key question for spreads and miner economics is the inverse relationship of price and Difficulty. As Difficulty and network Hashrate rise, miners earn fewer BTC for their unit of Hashrate. As price rises, the BTC they do earn is worth more, but also, as price increases, it drives an increase in Difficulty / Hashrate. Older equipment becomes profitable at higher power prices, so previously mothballed rigs get turned back on. In addition, stronger profitability drives both internal cash generation and additional investment to fund the growth of new mining capacity.
While Hashrate growth cannot be accelerated meaningfully due to supply chain constraints, we believe that the ASIC vendors like MicroBT and Bitmain maintain a robust order book and are sold out of production through summer 2021.
The BitOoda Hash Spread™ forecast is a key indicator of mining economics. With our long-term forecast for rising Difficulty, miners would do well to hedge production and lock in returns.
Hash Spreads™ may be range bound near a peak because of sustained network Hashrate growth, despite equipment supply constraints. Further Hash Spread™ expansion could be dependent on price appreciating faster than new rigs come online.
Long term price growth is supported by news flow about traditional financial institutions creating or approving growing exposure to Bitcoin, so it makes sense for miners to seek long exposure to Bitcoin.
However, we continue to advise clients to take some risk off the table while locking in advantageous levels of revenue / PH/s and MWh to cover operating and debt service obligations. Email us at email@example.com to discuss how we can help manage your risk.