The Weekly Hash, 2/2/22: Miner Revenue Edges Up; Miners With Floating Power Cost Exposed to Surging Power Prices

Our current target Hashrate analysis calls for a back-end loaded growth in network Hashrate to 327EH/s by the end of 2022. This estimate depends in part on whether Bitcoin’s price and economics are supportive of this Hashrate. However, Hashrate is already off to a strong start this year, with the last reset of +9.3% resulting in an all-time high target Hashrate of 191 EH/s. It appears likely the next reset will be flat to up slightly, despite volatility in Bitcoin. Please click here for the full report.

Bitcoin rose 5% week-on-week (WoW) to $38,787 as of midnight UTC on 2/1. The prospect of rising rates has weighed on equities and on risk assets in general, contributing to the overall crypto and crypto equity selloff. BTC shows a strong correlation to equity markets and has recovered from the lows along with the broader market. The correlation of Bitcoin to the Nasdaq has climbed to 58%.

Total BTC earnings per PH/s are ~4.79 mBTC, about flat with last week’s ~4.77 mBTC / PH/s (1mBTC or milliBTC = 1/1000 BTC). Transaction fees rose 34 bps WoW to 1.5% of miner rewards, or 0.09 BTC per block. The “Mempool” shows modest congestion, at 8,853 pending transactions, down from 23,774 pending transactions las week. We continue to assess congestion will stay generally low for a while.

Bitcoin mining revenue fell to $186 / PH/s per day and $203/MWh, owing to the higher BTC price, and slightly increased Tx fees. Block pace remains slightly below par so far this epoch, but we view this as transitory, with a likely flat to small positive reset late tomorrow.

The BitOoda North American Hash Spread™ rose 4.3% from $119 a week ago to $124. 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) increased further to $78.24 / MWh, leading to an aggregate spread of $124. We note that many miners have fixed price power purchase agreements at lower levels, so their experienced profitability should be superior to that indicated here.

Older-gen S9-class devices saw their Hash Spread™ down ~27% to ($7)/MWh — but still positive at power prices up to about 6.5c/ kWh ($65/MWh). S17-class devices, the bulk of the installed base, saw a hash spread of about $49/ MWh.

It now takes 192 MWh to mine 1 BTC using S19-class rigs, while S17-class machines consume 305 MWh, and S9-class, 546 MWh.

This translates into $14,974 in power expense to mine 1 BTC with S19-class rigs, and $42,596 using S9 rigs, excluding labor.

Takeaways

Mining margins have mean reverted, with revenue on the 47th percentile

Our YE 2022 Hashrate estimate of 327 EH/s needs to be considered in evaluating miner investment opportunities

Most 2022 Hashrate is already committed and will come online largely independent of price, so miner economics could overshoot to the downside

Power prices have been rising, exposing miners with floating power costs to uncertainty and risk

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