The Weekly Hash, 4/28/22: Laying out Feasible Hashrate and Tx Fee Forecasts; Mining IRRs Still Robust for Immersion S19XPs

BitOoda
3 min readMay 10, 2022

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 report.

Our target Hashrate estimates are unchanged for now. Miners are generally of the view that year-end-2022 Hashrate will end up in the 270–290EH/s range, below our estimate. However, current Hashrate is still tracking above our model. Thus, we view our expectations for large Hashrate growth in 4Q22 on the back of S19XP deliveries and easing power infrastructure constraints as largely intact. Thus, no changes to our forecast.

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.

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.

Based on this, slide 7 shows the MWh needed and operating cost to produce 1 Bitcoin over time. Assuming $50 per MWh opex, and sustained capex to improve the PH per MW of capacity for the fleet, the operating cost to produce 1 BTC could increase 8x over the 2020–30 period.

Total BTC earnings per PH/s are ~4.52 mBTC, down from last week’s ~4.64 mBTC / PH/s (1mBTC or milliBTC = 1/1000 BTC). Transaction Fees gained 63 bps WoW to 1.9% of miner rewards, or 0.12 BTC per block. The “Mempool” shows modest congestion, at 6,730 pending transactions.
Bitcoin mining revenue rose slightly to $206 / PH/s per day and $225/MWh,
as of last night. The block pace is slightly above par in the last 24 hours, at 146, but is 24 blocks behind par roughly a quarter of the way through the current difficulty epoch.

The BitOoda North American Hash Spread™ rose 2.9% from $183 a week ago to $189. 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 $35.40/ MWh 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 ~10% to $44/MWh. S17-class devices, the bulk of the installed base, saw a Hash Spread of about $106/ MWh.

It now takes 203 MWh to mine 1 BTC using S19-class rigs, while S17-class machines consume 314 MWh, and S9-class, 563 MWh.

Takeaways

Our year-end 2022 target Hashrate of 327 EH/s is unchanged for now

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

Based on ongoing capex, we assess the operating cost to produce 1 BTC will grow 8x from 2020 to 2030, to ~$46–50k

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BitOoda

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