Updated Bitcoin Hashpower Estimate: Lowering Estimate to 145 EH/s by Year End on China Ban, Power Infrastructure Bottlenecks
A key factor determining investment returns from Bitcoin mining is an estimate of future Hashrate and difficulty. Whether directly investing in Bitcoin mining assets or in mining stocks, this estimate is critical. The mining investment’s share of future Hashrate determines future Bitcoin earnings. Our “Bitcoin Reserve” metrics estimate the BTC expected to be mined by 1PH/s (7.2BTC) and 1MW (315BTC), operating through 2030.
We assess Hashrate could recover to 145EH/s by year end 2021, versus our prior 241 EH/s estimate. This is a significant downward revision, as China’s mining ban has taken roughly 50% of capacity offline.
The ongoing Chinese government crackdown on mining has resulted in observed Hashrate falling as low as 64 EH/s, although it has since recovered to 100 EH/s. We had estimated Chinese capacity at about 50% of worldwide capacity in July last year, somewhat lower than other estimates we have seen. With mining in China now shut down, we expect Hashrate growth to lag previous estimates until power infrastructure outside of China catches up.
In our view, a lack of power infrastructure currently constrains the industry — a shift from the previous semiconductor shortage. This is the result of the migration of miners out of China, who are looking to relocate to North America and elsewhere in the world. Current high-tension infrastructure cannot support incoming shipments, and thus many rigs now have nowhere to go. We assess that this power constraint will ease by 2024, after which the industry will once again be limited by the semiconductor market (mining economics aside).
We expect an inventory glut in the market, as wafer start commitments with foundries outstrip rig deployments in the market by ~93,000 wafers. Power infrastructure coming online by late 2022 / 2023 could flush the inventory, albeit at lower prices. Commissioning of infrastructure will lead to broad rig deployments and 2023 Hashrate acceleration.
Several variables could cause delivered Hashrate to vary from our estimates. The boundary conditions that combine to define the limits achieved by Hashrate include:
- Total Bitcoin mined daily, including Transaction Fees.
- The price of Bitcoin and associated mining profitability — Hashrate cannot sustain an increase beyond the marginal cost of production.
- The available power supply — Hashrate is constrained by stranded power availability, grid stabilization / controllable load functionality, and the political climate across local and national jurisdictions. Replacing any lost Chinese power elsewhere will face delays owing to transformer / substation lead times, assuming rigs are permitted to relocate.
- Advances in semi technology, which can influence power consumption per unit of hash, as well as amount of hash per unit of physical size of the underlying semiconductor.
- Availability of semiconductor capacity is a key constraint. The main rig makers have migrated to the latest process nodes, competing for scarce wafer capacity with the large players like Apple and Qualcomm, in a foundry industry seeing major shortages.
While the price of rigs is a constraint, we view it as a dependent variable on the overall price and profitability of mining Bitcoin.
- We expect 145H/s Hashrate by year end, with risks skewed slightly to the upside
- Bottom-up analysis suggests 100–150k wafer starts per year to achieve our long term Hashrate estimates, with a near-term 90k wafer inventory glut
- Our “Bitcoin Reserve” stands at 7.2BTC / PH/s and 315BTC/MW through 2030
- Paid subscribers can access our full report with detailed build up to our estimates. Contact firstname.lastname@example.org for more information.
This research is only for the clients of BitOoda. This research is not intended to constitute an offer, solicitation, or invitation for any securities and may not be distributed into jurisdictions where it is unlawful to do so. For additional disclosures and information, please contact a BitOoda representative at email@example.com.
Sam Doctor, the research analyst denoted by an “AC” on the cover of this report, hereby certifies that all of the views expressed in this report accurately reflect his personal views, which have not been influenced by considerations of the firm’s business or client relationships.
Conflicts of Interest
This research contains the views, opinions, and recommendations of BitOoda. This report is intended for research and educational purposes only. We are not compensated in any way based upon any specific view or recommendation.
Any information (“Information”) provided by BitOoda Holdings, LLC, BitOoda Digital, LLC, BitOoda Technologies, LLC or Ooda Commodities, LLC and its affiliated or related companies (collectively, “BitOoda”), either in this publication or document, in any other communication, or on or through http://www.bitooda.io/, including any information regarding proposed transactions or trading strategies, is for informational purposes only and is provided without charge. BitOoda is not and does not act as a fiduciary or adviser, or in any similar capacity, in providing the Information, and the Information may not be relied upon as investment, financial, legal, tax, regulatory, or any other type of advice. The Information is being distributed as part of BitOoda’s sales and marketing efforts as an introducing broker and is incidental to its business as such. BitOoda seeks to earn execution fees when its clients execute transactions using its brokerage services. BitOoda makes no representations or warranties (express or implied) regarding, nor shall it have any responsibility or liability for the accuracy, adequacy, timeliness or completeness of, the Information, and no representation is made or is to be implied that the Information will remain unchanged. BitOoda undertakes no duty to amend, correct, update, or otherwise supplement the Information.
The Information has not been prepared or tailored to address, and may not be suitable or appropriate for the particular financial needs, circumstances or requirements of any person, and it should not be the basis for making any investment or transaction decision. The Information is not a recommendation to engage in any transaction. The digital asset industry is subject to a range of inherent risks, including but not limited to: price volatility, limited liquidity, limited and incomplete information regarding certain instruments, products, or digital assets, and a still emerging and evolving regulatory environment. The past performance of any instruments, strategies, products or digital assets addressed in the Information is not a guide to future performance, nor is it a reliable indicator of future results or performance. Commodity trading involves substantial risk of loss.
Ooda Commodities, LLC is a member of NFA and is subject to NFA’s regulatory oversight and examinations. However, you should be aware that NFA does not have regulatory oversight authority over underlying or spot virtual currency products or transactions or virtual currency exchanges, custodians or markets.
BitOoda Technologies, LLC is a member of FINRA.
“BitOoda”, “BitOoda Difficulty”, “BitOoda Hash”, “BitOoda Compute”, and the BitOoda logo are trademarks of BitOoda Holdings, Inc.
Copyright 2021 BitOoda Holdings, Inc. All rights reserved. No part of this material may be reprinted, redistributed, or sold without prior written consent of BitOoda.