The Weekly Hash, 3/8/21: Custody Battles Heat up with PayPal Acquiring Curv; Positive News Flow Helps BTC Gain 12.6%
Bitcoin gained 12.6% week on week (WoW), rising from $45,359 to end at $51,086 at midnight UTC on 3/7. PayPal announced the acquisition of crypto custodian Curv, further deepening its involvement in digital assets. Newsflow from Goldman, Morgan Stanley and Citi added to positive sentiment as well.
Total BTC earnings per PH/s are ~6.31mBTC, down from ~6.68mBTC / PH/s last week on lower Tx fees, despite an increase in block rewards following a downward reset in Difficulty. (1mBTC or milliBTC = 1/1000 BTC.) Transaction Fees (Tx fees) fell 207 bps WoW to 7.1% of miner rewards, as we see reduced congestion in the “Mempool,” which currently holds roughly 50k pending transactions. The target Hashrate fell 1.3% to 153EH/s.
Bitcoin mining revenue rose to $323 / PH/s per day and $353/MWh, as increases in spot price offset declines in Tx fees.
The BitOoda North American Hash Spread™ climbed 10.5% WoW from $300 to $332 as higher revenue more than offset an increase in 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 $20.97 / MWh, leading to an aggregate spread of $332 across 5 power markets.
Older-generation S9-class devices, which are much more sensitive to price fluctuations, saw their Hash Spread™ gain ~7% to $78 / MWh. S17-class devices, the bulk of the current installed base, see a hash spread of about $237 / MWh.
We estimate that the Bitcoin mining network currently consumes about 6.8GW 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.
Today’s Hashrate of ~156 EH/s implies ~148 MWh power consumption per Bitcoin mined using S19 rigs, and substantially more if using older-generation equipment. This leaves 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 148 MWh of power consumption per BTC mined translates into $3,038 in power expense mining with S19 class rigs, based on our current average North American power price. It costs $10,806 using S9 rigs, still a 75%+ margin, excluding labor.
News flow continues to be supportive of a long-term investment case for Bitcoin.
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.
Email us at email@example.com to discuss how we can help manage your risk or gain exposure to the space.