The Weekly Hash, 7/19/21: Hashrate Bottoming Near ~98EH/s

Hashrate appears to be bottoming following China’s mining ban, with observed Hashrate at 100 EH/s, slightly above the current target Hashrate of ~98EH/s. Last Saturday’s reset brought difficulty down 4.8%. We recently lowered our year-end target Hashrate estimate to ~145EH/s (see here), with an upward bias if electrical infrastructure bottlenecks prove more transient than our model currently indicates.

The market has shifted from being semiconductor constrained to being power / infrastructure constrained. Given the long lead times on the power infrastructure side, we assess it will take several quarters for the infrastructure deployment to be complete. As a result, Hashrate will likely be below our prior forecasts for the next ~10 quarters.

Bitcoin fell 7.4% week-on-week to $31,708 as of 7/18 midnight UTC. Price is near a one-month low, despite recently-improved miner economics on increased BTC / PH/s flow following the weekend reset. Furthermore, we assess equipment prices should fall significantly over the next few months, given the shortage of sites into which to plug future deliveries; this should also accelerate an upgrade cycle of still-profitable S9 or S17 equipment to latest-generation rigs.

Total BTC earnings per PH/s are ~9.32 mBTC, up from ~8.96 mBTC / PH/s last week following the reset. (1mBTC or milliBTC = 1/1000 BTC.) Improved BTC earnings have not fully offset price declines. Transaction fees fell 92 bps WoW to 1.3% of miner rewards, or 0.12 BTC per block, with very low congestion levels in the “Mempool”.

Bitcoin mining revenue fell to $296 / PH/s per day and $440/MWh as price fell and the reset offset decreases in transaction fees. The network has mostly normalized from the recent China ban, and we expect Hashrate to begin rising again.

The BitOoda North American Hash Spread™ dropped 4.1% from $418 to $401. 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) of $38.90 / MWh leads to an aggregate spread of $401.

Older-gen S9-class devices saw their Hash Spread™ down ~5.3% to $85/MWh. S17-class devices, the bulk of the installed base, saw a hash spread of about $283/ MWh.

We estimate that the Bitcoin mining network currently consumes about 4GW of power. Excess rigs over available power should accelerate the retirement of older-gen equipment in the coming months.

The 72 MWh required to mine 1 BTC with S19-class rigs translates into $2,805 in power expense. It costs $9,975 using S9 rigs, a 65%+ margin, excluding labor.

Takeaways

Mining economics have improved in BTC terms but weakened in USD terms following Saturday’s reset

Hashrate may be bottoming and likely will begin to tick back up from here

Miners continue to face infrastructure bottlenecks, which should lead to 2+ years of better mining economics relative to our prior estimates

We assess this presents an opportunity for US-based miners to gain share and acquire rigs and new hosting customers at attractive terms

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