The Weekly Hash, 5/10/2021: High Block Count Could Lead to Record Difficulty

Bitcoin rose 3% week on week (WoW), reaching $58,288 as of 5/9 at midnight UTC. The network tracked 186 blocks mined yesterday, maintaining levels over 170 through most of the week. The upcoming difficulty reset will see a large increase in target Hashrate, possibly to new all-time highs.

Total BTC earnings per PH/s are ~6.47mBTC, down from ~6.55mBTC / PH/s last week on decreased Transaction fees (Tx fees). (1mBTC or milliBTC = 1/1000 BTC.) Tx fees fell 121 bps WoW to 5.6% of miner rewards, as we see low congestion levels in the “Mempool” driven by the high block count.

Bitcoin mining revenue increased to $377 / PH/s per day and $409/MWh due to the slightly higher spot price.

The BitOoda North American Hash Spread™ gained 1.2% WoW from $386 to $390 as BTC price rose and power prices edged up.

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. Bloomberg data shows a weighted average around the clock U.S. wholesale industrial power price of $18.38 / MWh, leading to an aggregate spread of $390 across 5 power markets.

Older-generation S9-class devices saw their Hash Spread™ stagnate at $97 / MWh. S17-class devices, the bulk of the current installed base, saw a hash spread of about $280 / MWh.

The current target Hashrate of ~147 EH/s implies ~143 MWh power consumption per Bitcoin mined using S19 rigs, and substantially more 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 143 MWh of power consumption per BTC mined translates into ~$2,600 in power expense mining with S19-class rigs, based on the current average North American power price. It costs $9,325 using S9 rigs, still an 80%+ 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.

Takeaways

Sustained high block counts suggest a possible all-time high difficulty reset by Thursday morning, implying an unusually short 11.5-day difficulty epoch.

Mining remains 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, and rigorous hedging programs.

Email us at info@bitooda.io to discuss how we can help manage your risk or gain exposure to the space.

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