The Weekly Hash, 5/3/2021: Network Difficulty Drops While Observed Hashrate Peaks

Bitcoin rose 15.6% week on week (WoW), recovering back to $56,573 as of 5/2 at midnight UTC. The difficulty reset on Saturday saw a 12.7% decline to 20.61 T, or 147 EH/s in target Hashrate, due to the impact of the recent Chinese outage on the epoch’s average block time. Hash has recovered, however, and is currently at a 190EH/s level, signifying a large increase in target Hashrate to a new all time high if the 181 blocks mined yesterday represent a sustained pace of mining.

Total BTC earnings per PH/s are ~6.55mBTC, up from ~6.03mBTC / PH/s last week on the lower target Hashrate, partially offset by lower Transaction fees (Tx fees). (1mBTC or milliBTC = 1/1000 BTC.) Tx fees fell 476 bps WoW to 6.8% of miner rewards, as we see low congestion levels in the “Mempool” driven by the high block count.

Bitcoin mining revenue increased to $371 / PH/s per day and $402/MWh due to the lower difficulty and higher price.

The BitOoda North American Hash Spread™ gained 25.8% WoW from $307 to $386 as BTC price recovered and power prices edged down.

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 $16.18 / MWh, leading to an aggregate spread of $386 across 5 power markets.

Older-generation S9-class devices saw their Hash Spread™ rise ~26% to $97 / MWh, strengthening margins. S17-class devices, the bulk of the current installed base, see a hash spread of about $277 / MWh.

The current target Hashrate of ~147 EH/s implies ~141 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 141 MWh of power consumption per BTC mined translates into ~$2,300 in power expense mining with S19-class rigs, based on the current average North American power price. It costs $8,099 using S9 rigs, still an 85%+ 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

The recovery of Chinese capacity has led to extremely high block counts, as Hashrate has bounced back from the temporary lows that drove target Hashrate down.

Difficulty could rise to all time highs at the next reset in ~10 days.

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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