The Weekly Hash, 2/1/21: Bitcoin Mining draws ~7.7GW of power amid improving Hash Spreads™ and robust mining economics
Bitcoin gained 2.9% in a volatile week, to end at $33,158 at midnight UTC on 1/31. Network Hashrate currently is closely tracking the target Hashrate of 149EH/s. Total BTC earnings per PH/s are ~6.70mBTC, up from ~6.45mBTC / PH/s last week, on higher Tx fees. (1mBTC or milliBTC = 1/1000 BTC.)
Transaction Fees (Tx fees) rose 353 bps week-on-week (WoW) to 9.8% of miner rewards, with 144 blocks mined on 1/31. We have observed a strong negative 69% correlation between daily blocks mined and Tx fees, as rising block count leads to less network congestion and shorter confirm times.
Bitcoin mining revenue rose to $222 / PH/s per day and $243/MWh, as price increases combined with higher Tx Fees.
The BitOoda North American Hash Spread™ edged up 7.5% WoW to $208, having peaked at $311 on 1/8.
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 $34.82 / MWh, leading to an aggregate spread of $208 across 8 power markets.
Older-generation S9-class devices, which are much more sensitive to price fluctuations, saw their hash spread gain ~11$ to $33.44 / MWh. S17-class devices, the bulk of the current installed base, see a hash spread of about $143 / MWh.
We estimate that the Bitcoin mining network currently consumes about 7.7GW of power, with S19-class devices accounting for less than 10% of that.
At current Difficulty levels, it takes $4750 in power expense to mine 1 BTC using S19 rigs, and $16,914 using S9 rigs at the national average power price. Thus, excluding labor (approximately $1000 per BTC on S19s), mining margins range from 50% to 85%.
Any power purchase agreements that lower the price, or that deliver incentives such as rebates for curtailment as a demand response load, can further reduce the cost of power. The below chart shows the impact of power price on the cost to mine 1BTC.
The marginal cost of 1 BTC is about $4750, with about 50% margins even with old, depreciated S9 machines.
Long-term price growth is supported by news flow surrounding accelerating fund allocations to the asset class. While investors need to navigate price and difficulty risk that can pose existential threats to unhedged mining operations, we are optimistic about the long-term outlook for well-capitalized, appropriately-hedged businesses.
Email us at firstname.lastname@example.org to discuss how we can help manage your risk or gain exposure to the space.