The Weekly Hash, 3/24/22: Bitcoin Mining Reserve at 2.13BTC / PH/s / Day (2023–2030); 2022 Hash Growth Tracking Model

Our current target Hashrate analysis calls for a back-end loaded growth in network Hashrate to 327EH/s by the end of 2022. Our longer-term estimates suggest 1600 EH/s is feasible by the end of the decade provided BTC price growth supports such expansion. Click here for the full version of this report.

We currently model Transaction Fee growth over time to become the dominant source of miner revenue by 2028/2029 (slide 3). However, it will require increasing Tx volume growth and network congestion to achieve this, which we plan to examine in upcoming reports.

Daily revenue per PH/s would decline over time, stabilizing post the 2028 halving if Tx fees pick up (slide 4). As a result, a PH/s of mining capacity operating continuously would generate an estimated 0.8BTC in all of 2023, and just 0.12BTC in all of 2030, compared with 4.3BTC in 2020 and 1.4BTC in 2022 (slide 5). Our public companies report this week examined the implications of this “Bitcoin Mining Reserve” for valuation.

Total BTC earnings per PH/s are ~4.63 mBTC, up fractionally from last week’s ~4.63 mBTC / PH/s (1mBTC or milliBTC = 1/1000 BTC). Transaction Fees gained 1 bps WoW to 1.1% of miner rewards, or 0.07 BTC per block. The “Mempool” shows increasing congestion, at 10,055 pending transactions.

Bitcoin mining revenue rose slightly to $196 / PH/s per day and $214/MWh, as of last night. The block pace is above par in the last 24 hours, at 155, but is 45 blocks ahead ofpar halfway through the current difficulty epoch.

The BitOoda North American Hash Spread™ rose 15% from $1566 a week ago to $180. 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) is $34.07 / MWh, leading to an aggregate spread of $180. We note that many miners have fixed price power purchase agreements at lower levels, so their experienced profitability should be higher.

Older-gen S9-class devices saw their BitOoda Hash Spread™ up ~49% to $41/MWh. S17-class devices, the bulk of the installed base, saw a Hash Spread of about $101/ MWh.

It now takes 198 MWh to mine 1 BTC using S19-class rigs, while S17-class machines consume 314 MWh, and S9-class, 563 MWh.

During an epoch, variability in MWh / BTC is driven by Tx Fee fluctuations; a slight increase in fees leads to a slight week-on-week decrease in MWh needed to mine 1 BTC.

The current power prices translates into $6,740 in power expense to mine 1 BTC with S19-class rigs and $19,173 using S9 rigs, excluding labor.

Takeaways

Mining margins have mean reverted, with daily revenue / PH/s in the 50th percentile

Tx Fees will play a key role in long term miner revenue, which is decaying with expanding network Hashrate

Our model pegs the 2023 & beyond “Bitcoin Mining Reserve” at 2.13BTC per PH/s per day operated continuously through 2030

Most 2022 Hashrate is already committed and will come online largely independent of price, so miner economics could overshoot to the downside, particularly since deployments are ahead of our model

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