The Weekly Hash, 8/23/21: Bitcoin Breaks $50,000, PayPal Expands Support

Bitcoin rose 4.6% week-on-week (WoW), settling at $49,363 as of midnight UTC on 8/22. Price broke $50,000 this morning amid PayPal’s announcement of plans to allow U.K users to buy, sell, and hold cryptocurrencies. Observed Hashrate suggests the next difficulty reset on Wednesday 8/25 will likely be ~+12–14%. Miners continue to bring rigs online as Chinese miners redeploy out of China and other planned expansions progress. Power infrastructure remains the bottleneck to expansion over the next 6–7 quarters, during which period Hashrate — while increasing — is expected to remain below the prior growth trajectory. Current price action, coupled with lower Hashrate, keeps miner economics attractive for the time being.

Total BTC earnings per PH/s are ~8.18 mBTC, up from ~8.15 mBTC / PH/s last week on increased Tx fees (1mBTC or milliBTC = 1/1000 BTC). Transaction fees rose 30 bps WoW to 1.1% of miner rewards, or 0.07 BTC per block. The “Mempool” shows higher congestion compared to prior weeks, with over 200k pending transactions in the last 24 hours. In our assessment, Asian traders have historically been less likely to leave their cryptoassets on-exchange than traders on platforms such as Coinbase, although that is changing slowly following hacks such as Japan’s Liquid exchange and the $600mm Poly hack. The falloff in Asian trading following the China ban, and thus the reduction in crypto movement between platforms and individual wallets, may be partly responsible for the lower Mempool congestion and thus lower Transaction fees.

Bitcoin mining revenue rose to $404 / PH/s per day and $440/MW, owing to higher BTC spot price and slightly higher Tx fees.

The BitOoda North American Hash Spread™ rose 3.8% WoW from $387 to $402, lower than price appreciation as our tracked North America power prices (weighted average around the clock U.S. wholesale industrial power price in 5 markets) rose to $38.15 / MWh from $31.05 a week ago.

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.

Older-gen S9-class devices saw their Hash Spread™ down ~1% to $86/MWh. S17-class devices, the bulk of the installed base, saw a hash spread of about $284/ MWh.

The 112 MWh required to mine 1 BTC with S19-class rigs translates into $4,278 in power expense. It costs $15,205 using S9 rigs, a ~69% margin, excluding labor.

Takeaways

We expect difficulty to increase by 12–14% at the next reset on Wednesday

With Mempool congestion remaining low, mining economics should weaken, barring BTC price action

However, they should still remain very strong even post-reset, as Hashrate growth continues to track below the pre-China-ban trajectory

Miners continue to face infrastructure bottlenecks

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

A global digital asset financial technology & services platform providing next-gen risk management solutions, best-execution brokerage & expert market analysis.