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.

Takeaways

  • We expect 245EH/s Hashrate by year end

Disclosures

Purpose

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 info@bitooda.io.

Analyst Certification

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.

General Disclosures

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.

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