The Weekly Hash, 7/5/21: Target Hashrate Down 28% on Weekend Reset
China’s mining ban is playing out, resulting in target Hashrate falling to ~103 EH/s. Observed Hashrate currently resides at 88 EH/s; we expect another 10%+ drop in target Hashrate at the next reset. 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 we model.
The market has shifted from being semiconductor constrained to being power / infrastructure constrained. Given the long lead times on the 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.
The key driver of China’s actions is capital control — and control more generally, in our view. Mining allows Chinese players to convert RMB into BTC, and consequently into currencies outside governmental control. It therefore follows that miners may not be permitted to relocate their equipment out of China, which would not only reduce future capital control evasion but also give a pass on prior evasion or compounded growth in external capital from that prior evasion.
Bitcoin rose 2.5% week-on-week to $35,356 as of 7/4 midnight UTC. Despite only a slight price increase, miner economics are improving because of the higher Bitcoin flow per PH/s. 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 ~9.28 mBTC, up from ~6.77 mBTC / PH/s last week. (1mBTC or milliBTC = 1/1000 BTC.) Saturday’s reset saw blocks counts normalizing, coupled with low network Hashrate driving increased PH/s earnings. Transaction fees fell 126 bps WoW to 5.6% of miner rewards, or 0.52 BTC per block, with low congestion levels in the “Mempool”.
Bitcoin mining revenue rose to $328 / PH/s per day and $488/MWh as price remained stagnant and improved BTC flow / PH/s from the ongoing China mining ban, which eliminated a large portion of the network. This will continue to improve in the short term as the market adjusts to the falling Hashrate.
The BitOoda North American Hash Spread™ nearly doubled (99.6% WoW) from $225 to $449. 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 $449.
Older-gen S9-class devices saw their Hash Spread™ up ~135% to $98/MWh. S17-class devices, the bulk of the installed base, saw a hash spread of about $318 / MWh.
The 72.4 MWh required to mine 1 BTC with S19-class rigs translates into $2,818 in power expense. It costs $10,023 using S9 rigs, a 70%+ margin, excluding labor.
•Mining economics have improved significantly following the weekend reset
•The big story right now is the continuing Hashrate decline due to Chinese regulatory actions and crypto bans
•Chinese miners are seeking sites to which to direct future equipment deliveries, but infrastructure bottlenecks will 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