The Weekly Hash, 3/15/21: New price record, new mining profitability high; unchanged thesis: Long Bitcoin
Bitcoin gained 17.3% week on week (WoW), reaching an all-time high of $61,289 before dropping to $59,906 at midnight UTC on 3/14, continuing down to about $57,000 at the time of writing.
Total BTC earnings per PH/s are ~6.39mBTC, down from ~6.42mBTC / PH/s last week on slightly lower Tx fees. (1mBTC or milliBTC = 1/1000 BTC.) Transaction Fees (Tx fees) fell 115 bps WoW to 8.3% of miner rewards, as we see moderate congestion in the “Mempool,” with 60k pending transactions. 154 blocks mined in the past 24 hours are consistent with a ~4–5% difficulty increase at the next reset, expected on Friday 3/19. The faster blocks contribute to a smaller Mempool and lower Tx Fees on easing network congestion.
Bitcoin mining revenue rose to $383 / PH/s per day and $415/MWh, as increases in spot price outweighed declines in Tx fees.
The BitOoda North American Hash Spread™ climbed 13.6% WoW from $342 to $389 as price increases offset a higher power price.
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 around the clock U.S. wholesale industrial power price of $26.45 / MWh, leading to an aggregate spread of $389 across 5 power markets.
Older-generation S9-class devices, which are much more sensitive to price fluctuations, saw their Hash Spread™ gain ~10.9% to $90 / MWh. S17-class devices, the bulk of the current installed base, see a hash spread of about $277 / MWh.
We estimate that the Bitcoin mining network currently consumes about 7.1GW of power. In our view, the rotation of Hashpower into next-gen equipment continues to drive overall mining efficiency gains. As we have previously noted, luck may also play a role in this estimate.
The current observed Hashrate of ~167 EH/s implies ~159 MWh power consumption per Bitcoin mined using S19 rigs, and substantially more if using older-generation equipment. Current mining economics leave a significant margin of safety for miners, who can absorb both power price and Bitcoin price fluctuations, even as we expect total network Hashrate to continue to increase.
The 159 MWh of power consumption per BTC mined translates into $3,817 in power expense mining with S19-class rigs, based on our current average North American power price. It costs $13,575 using S9 rigs, still a 75%+ margin, excluding labor. As a rule of thumb, we estimate labor costs to be (very) approximately $1000 / BTC for S19-class rigs, about $1500 for S17-class rigs, and $4000 for S9-class rigs.
News flow continues to be supportive of a long-term investment case for Bitcoin, with increasing acceptance of BTC both as an investment / inflation hedge as well as for payments. (The MLB team Oakland As now accepts BTC as payment for its 2021 season tickets).
Mining is an attractive way for investors to gain exposure to Bitcoin, although mining rig shipping delays enhance price and difficulty risk.
We can help clients manage risk through compliant, systematic, rigorous hedging programs.
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