The Weekly Hash, 8/30/21: Reset Took Target Hashrate +13% to 126 EH/s; Expect a Smaller 2–5% Increase Next Week

Bitcoin fell 0.8% week-on-week (WoW), settling at $48,948 as of midnight UTC on 8/29. Price has remained in the upper $40,000’s for a week after breaking $50,000 briefly last Monday. Wednesday’s difficulty reset took the target Hashrate to 126 EH/s, up ~13% over the prior epoch. Observed Hashrate is currently at 125 EH/s, although we continue to expect an upward reset next week of 2–5%.

Total BTC earnings per PH/s are ~7.2 mBTC, down from ~8.18 mBTC / PH/s last week on the higher target Hashrate and lower Tx fees (1mBTC or milliBTC = 1/1000 BTC). Daily earnings still remain well above levels prior to China’s mining ban announcement in late May, but will likely continue to trend downward. Transaction fees fell 22 bps WoW to 0.9% of miner rewards, or 0.06 BTC per block, with only 2,000 pending transactions in the “Mempool” at the time of writing, further pressuring BTC-denominated flows per unit of Hashrate.

Bitcoin mining revenue dropped to $353 / PH/s per day and $385/MWh on the 13% difficulty reset and lower fees, aided by the slight decline in the spot price.

The BitOoda North American Hash Spread™ dropped ~14% from $402 to $347 per MWh. A slightly higher average power price in our tracked markets led to the Hash Spread™ contracting slightly faster than revenue. 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 $38.12 / MWh leads to an aggregate spread of $347.

Older-gen S9-class devices saw their Hash Spread™ down ~18% to $70/MWh. S17-class devices, the bulk of the installed base, saw a Hash Spread™ of about $243/ MWh.

The 127 MWh required to mine 1 BTC with S19-class rigs translates into $4,851 in power expense. It costs $17,242 using S9 rigs, a ~65% margin, excluding labor. Thus, power costs range from 10–35% of revenue, depending on the hardware generation in use.

Current Bitcoin price allow strong margins capable of absorbing spot and power price fluctuations, even using older-gen S9 rigs. Direct labor costs in the US equate to about $7–10 per MWh at scale, but significantly more for small operations that still need to staff for just a few MW of capacity.

Takeaways

Last week’s reset increased target Hashrate by ~13% to ~126 EH/s; looking ahead, we expect growth rates to moderate somewhat in the near term.

However, Hashrate could accelerate further if additional sites became available for Chinese miners.

While we are not technical analysts, the recent sustained high-$40ks Bitcoin price following the run-up may be constructive longer term.

Mining margins have weakened slightly, but remain strong even for older-gen rigs, and infrastructure bottlenecks could help preserve the current strong margins for longer.

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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