Bitcoin rallied 37.4% in a convincing week, to end at $46,122 at midnight UTC on 2/7. Tesla drove the large gain after announcing the purchase of $1.5b in Bitcoin, noting its plans to accept the currency as payment. The last Difficulty reset on Friday took the target Hashrate up ~3% to 153EH/s. Total BTC earnings per PH/s are ~6.67mBTC, down from ~7.10mBTC / PH/s last week following the reset, and on higher Tx fees. (1mBTC or milliBTC = 1/1000 BTC.)
Transaction Fees (Tx fees) rose 293 bps week-on-week (WoW) to 12.1% of miner rewards. Recent network transaction growth has driven rising fees on increased network congestion, resulting in the falling negative correlation we had previously observed between block count and transaction fees since the halving in May.
Bitcoin mining revenue rose to $308 / PH/s per day and $336/MWh, as price increases combined with higher Tx fees.
The BitOoda North American Hash Spread™ burst upward 33.5% WoW to $302, maintaining its peak through Sunday.
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 $302 across 8 power markets.
Older-generation S9-class devices, which are much more sensitive to price fluctuations, saw their Hash Spread™ gain a solid 55% to $60 / MWh. S17-class devices, the bulk of the current installed base, see a hash spread of about $211 / MWh.
We estimate that the Bitcoin mining network currently consumes about 8.4GW of power, with S19-class devices accounting for around 15% of that. As we have noted previously, luck may play a role in accounting for the 700MW change in estimated power consumption WoW.
Following the last Difficulty reset, it now takes $4774 in power expense to mine 1 BTC using S19 rigs, and $16,979 using S9 rigs at the national average power price. Thus, excluding labor (approximately $1000 per BTC on S19s), mining margins range from 60% to 90%.
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 $4800 with S19 rigs, with about 60% margins even with old, depreciated S9 machines.
Long-term price growth is supported by news flow surrounding accelerating fund and corporate 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.
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