Updated BitOoda Bitcoin Hashpower Estimate: 241 EH/s by Year End, 92EH/s Below Prior on Semi Shortages; China Adds Uncertainty
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 the share of future Bitcoin earnings.
We assess Hashrate could grow to 241EH/s by the end of 2022, compared with our prior 333EH/s estimate and the current 179EH/s target (see here). This implies 109EH/s added in 2021, vs. 40.5EH/s added in 2020. Target Hashrate is up 46EH/s YTD, but is expected to decline 14‐18% at the next reset around May 29.
The ongoing Chinese government crackdown on mining has an as yet unquantified downside impact. We do not know how much capacity will continue to operate; we had estimated Chinese capacity at about 50% of worldwide capacity in July last year, somewhat lower than other estimates we have seen. Whether miners are allowed to either move or sell their equipment overseas remains to be seen. We assess the pace of deployment by Chinese miners will likely slow (although those rigs will end up elsewhere).
Several variables could cause delivered Hashrate to vary from our estimates. The boundary conditions that combine to define the limits achieved by Hashrate include:
1. Total Bitcoin mined daily, including Transaction Fees
2. The price of Bitcoin and associated mining profitability — Hashrate cannot sustain an increase beyond the marginal cost of production.
3. 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 take time, assuming rigs are permitted to relocate.
4. 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.
5. 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 market seeing major chip shortages.
While the price of rigs is a constraint, we view that as a dependent variable on the overall price and profitability of mining Bitcoin.
In our view, the industry will bump up against the semiconductor constraints before the price and power constraints. However, the actual delivered Hashrate could end up lower than estimated if Bitcoin price were to fall and stay substantially lower than current levels indefinitely.
The ongoing semiconductor supply shortages should ease modestly by year end. However, the convergence of Bitcoin rig ASIC technology with leading edge semiconductors implies miners are competing for access to the latest technology and process nodes. Demand growth, including from autos, AI, IoT and 5G deployment, and the long capex lead times and resurging front end capital intensity in a foundry industry that is essentially just two players — TSMC and Samsung — at the leading edge, could keep wafer starts on allocation for several years.
Risks to our Hashrate estimates: Upside risk would be driven by an easing semiconductor constraint coupled with a surging price. Downside risks appear more likely at the moment, driven by rig shortages, recent declines in Bitcoin price and, especially, the regulatory uncertainty around Chinese mining capacity.
- We expect 245EH/s Hashrate by year end
- Risks to the estimate are slightly skewed to the downside
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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.
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