The Weekly Hash, 12/22/21: Target Hashrate Likely to End 2021 at 170EH/s; Hash Spreads Tighten; CME Open Interest Dips 3% WoW

Bitcoin rose 1.6% week-on-week (WoW), settling at $49,082 as of midnight UTC on 12/21. Several BTC miners have outperformed BTC YTD, notably Mawson and Marathon, but most have underperformed over the past week. Click here for the full version of this report.

The ProShares BITO ETF trails BTC by 2.6% since fund inception; the fund launch correlates strongly with increased CME open interest, as AUM increased rapidly in the first week from launch.

The CME Futures curve has flattened at the front end, inside the liquidity window. Current open interest fell 3% WoW to 12,852 lots. The Commitment of Traders data from 12/14 shows that spreading positions increased, while commercial players reduced their longs. The non-commercial player net length on the CME is now short 257 lots, compared with short 117 lots the week prior and short 729 lots (the YTD minimum) just before Thanksgiving (11/23).

Total BTC earnings per PH/s are ~5.26 mBTC, near identical to last week’s on a minor reduction in transaction fees (1mBTC or milliBTC = 1/1000 BTC). Transaction fees fell 7 bps WoW to 1.2% of miner rewards, or 0.07 BTC per block. The “Mempool” shows low congestion levels, with 5,130 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, as well as increasing Layer 2 adoption, such as the Lightning Network.

Bitcoin mining revenue gained to $258 / PH/s per day and $282/MWh. Miner economics are on track to come in modestly better than our previous year-end estimate. The current block rate suggests that the actual year-end target Hashrate will likely be around 170 EH/s, short of our prior 198EH/s forecast.

The BitOoda North American Hash Spread™ fell 1.3% from $245 to $243. 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 $38.98 / MWh leads to an aggregate spread of $243.

Older-gen S9-class devices saw their Hash Spread™ down ~9% to $60/MWh. S17-class devices, the bulk of the installed base, saw a hash spread of about $138/ MWh.

It now takes 174 MWh to mine 1 BTC using S19-class rigs, while S17-class machines would consume 277 MWh, and S9-class, 496 MWh. This translates into $6,795 in power expense to mine 1 BTC with S19 class rigs, and $19,308 using S9 rigs, a ~61% contribution margin, excluding labor.

Takeaways

•Mining margins are attractive, but are mean reverting, down to the 60th percentile of 3-year history

•Hashrate is likely ~20EH/s or 10% short of our year-end estimate, helping maintain margins despite price declines

•However, most miners continue to underperform Bitcoin

•CME Futures net length fell to short 257 lots, from short 117 lots last week