Bitcoin Mining Economics Improved Considerably, Mining Revenue Increases, but BTC Price Still Stagnant: Report

The BitOoda team has shared their Weekly Hash report, dated July 5, 2021. The target Bitcoin (BTC) hashrate is down 28% (on weekend reset), the BitOoda team noted in their latest report.

China’s Bitcoin mining ban is “playing out, resulting in target Hashrate falling to ~103 EH/s, the BitOoda team revealed while adding that the observed Hashrate presently “resides at 88 EH/s.”

The company says they’re expecting another 10%+ decline in target Hashrate “at the next reset.” The research firm recently lowered its year-end target Hashrate estimate “to ~145EH/s,” with an upward “bias” if electrical infrastructure bottlenecks “prove more transient than we model.”

As stated in the report, the market has shifted from “being semiconductor constrained to being power/infrastructure constrained.” Due to the long lead times on the infrastructure side, the company believes it should take several quarters for the infrastructure deployment “to be complete.”

Because of these developments, Hashrate will “likely be below our prior forecasts for the next ~10 quarters.” The company also noted that the main driver of China’s actions is “capital control — and control more generally, in our view.”

As previously reported, crypto mining allows Chinese players to convert RMB into BTC, and “consequently into currencies outside governmental control.” It “therefore follows that miners may not be permitted to relocate their equipment out of China, which would not only reduce future capital control evasion but also give a pass on prior evasion or compounded growth in external capital from that prior evasion.”

The report also mentioned:

“Bitcoin rose 2.5% week-on-week to $35,356 as of 7/4 midnight UTC. Despite only a slight price increase, miner economics are improving because of the higher Bitcoin flow per PH/s. … we assess equipment prices should fall significantly over the next few months, given the shortage of sites into which to plug future deliveries; this should also accelerate an upgrade cycle of still-profitable S9 or S17 equipment to latest-generation rigs.”

The report added that aggregate BTC earnings “per PH/s are ~9.28 mBTC, up from ~6.77 mBTC / PH/s last week. (1mBTC or milliBTC = 1/1000 BTC.)”

Saturday’s reset saw block counts “normalizing, coupled with low network Hashrate driving increased PH/s earnings,” the report noted while adding that transaction fees “fell 126 bps WoW to 5.6% of miner rewards, or 0.52 BTC per block, with low congestion levels in the ‘Mempool’.”

The report further revealed:

“Bitcoin mining revenue rose to $328 / PH/s per day and $488/MWh as price remained stagnant and improved BTC flow / PH/s from the ongoing China mining ban, which eliminated a large portion of the network. This will continue to improve in the short term as the market adjusts to the falling Hashrate.”

As covered, the BitOoda North American Hash Spread™ almost “doubled (99.6% WoW) from $225 to $449.” The company explains that they 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 company noted while adding that the weighted average “around the clock U.S. wholesale industrial power price (5 markets) of $38.90 / MWh leads to an aggregate spread of $449.”

The update from BitOoda also noted that the older-gen S9-class devices “saw their Hash Spread™ up ~135% to $98/MWh. S17-class devices, the bulk of the installed base, saw a hash spread of about $318 / MWh.” The 72.4 MWh “required to mine 1 BTC with S19-class rigs translates into $2,818 in power expense. It costs $10,023 using S9 rigs, a 70%+ margin, excluding labor,” the report added.

The main takeaways from the report are as follows:

  • Mining economics have “improved significantly following the weekend reset”
  • The big story right now is “the continuing Hashrate decline due to Chinese regulatory actions and crypto bans”
  • Chinese miners are “seeking sites to which to direct future equipment deliveries, but infrastructure bottlenecks will lead to 2+ years of better mining economics relative to our prior estimates”
  • “[BitOoda] assess this presents an opportunity for US-based miners to gain share and acquire rigs and new hosting customers at attractive terms.”
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