The Weekly Hash, 8/2/21: Bitcoin Up 12% Week on Week, Briefly Breaks $40,000

Saturday’s difficulty reset took target Hashrate to 104 EH/s, up 6% over the prior period. Observed Hashrate appears to have stabilized after the declines related to the Chinese mining ban. Our current year-end target Hashrate estimate is ~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, there is a shortage of ready sites where miners can plug in all the contracted purchases as they get delivered. While that could result in an inventory correction and a decline in rig prices, this could be offset if the main rig manufacturers (including Bitmain and MicroBT) are successful in pushing out their wafer capacity allocations at their foundry partners — TSMC, Samsung etc. This is certainly feasible: given the global semiconductor shortages, neither TSMC or Samsung would have a problem filling up capacity freed up by postponing some of Bitmain / MicroBT wafer starts by a few months.

Bitcoin gained 12.1% week-on-week (WoW), settling at $39,968 as of midnight UTC on 8/1. Price increases offset the reduction in BTC / PH/s flow as a result of the Saturday reset, allowing miners to maintain strong margins. Strong profitability coupled with potential excess rig inventory could accelerate an upgrade cycle of still-profitable S9 or S17 equipment to latest-generation rigs.

Total BTC earnings per PH/s are ~8.76 mBTC, down from ~9.29 mBTC / PH/s last week on decreased Tx fees (1mBTC or milliBTC = 1/1000 BTC). Transaction fees rose 1 bps WoW to 1.0% of miner rewards or 0.06 BTC per block, with minor congestion in the “Mempool”.

Bitcoin mining revenue rose to $350 / PH/s per day and $382/MWh following the sizable increase in spot with a slight reduction in BTC / PH/s rewards. As noted previously, the network has mostly normalized from recent events, and we expect Hashrate to slowly recover to track our previous estimates.

The BitOoda North American Hash Spread™ gained 7.6% from $316 to $343. 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 $343.

Older-gen S9-class devices saw their Hash Spread™ up ~12% to $69/MWh. S17-class devices, the bulk of the installed base, saw a hash spread of about $240/ MWh.

The 104 MWh required to mine 1 BTC with S19-class rigs translates into $4,070 in power expense. It costs $14,467 using S9 rigs, a ~64% margin, excluding labor.

Takeaways

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

Hashrate may have bottomed 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 capacity and new hosting customers at attractive terms

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