Bitcoin Mining Economics Maintain Improvement Since Last Week, as Chinese Miners Seek Sites for Future Equipment Deliveries: Report

The research analysts at BitOoda have published their Weekly Hash report, dated July 12, 2021. The report reveals that cryptocurrency miner economics have improved despite the range-bound Bitcoin (BTC) price.

The BitOoda team writes in a blog post that China’s Bitcoin mining ban “continues to play out,” as observed Hashrate or the amount of computing power securing the BTC network “resides at 89 EH/s.”

BitOoda says it’s now expecting another 10%+ drop in Bitcoin mining difficulty “at the next reset as observed Hashrate is equally below the current target.”

As covered, BitOoda has lowered its year-end target Hashrate estimate “to ~145EH/s, with an upward bias if electrical infrastructure bottlenecks prove more transient than our model currently indicates.” The weekly report points out that the market has shifted from being “semiconductor constrained” to being “power / infrastructure constrained.”

As noted in the report:

“Given the long lead times on the infrastructure side, we assess it will take several quarters for the infrastructure deployment to be complete. As a result, Hashrate will likely be below our prior forecasts for the next ~10 quarters.”

The report further revealed that the Bitcoin price fell 3.1% WoW to $34,258 “as of 7/11 midnight UTC.” The BTC price has hovered in this range for nearly a month now, “despite recently-improved miner economics on increased BTC / PH/s flow last reset,” the report added while pointing out that the BitOoda team assesses 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 also mentioned that total BTC earnings per PH/s “are ~8.96 mBTC, down from ~9.28 mBTC / PH/s last week on decreased transaction fees. (1mBTC or milliBTC = 1/1000 BTC.)”

The report added:

“Improved BTC earnings have not driven price accordingly, as miners seek to deploy rigs to capitalize on current margins. Transaction fees fell 334 bps WoW to 2.3% of miner rewards, or 0.20 BTC per block, with very low congestion levels in the ‘Mempool’.”

The report continued:

“Bitcoin mining revenue fell to $307 / PH/s per day and $457/MWh as price stagnated 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.”

The BitOoda North American Hash Spread™ fell 7% from $449 to $418. As covered, BitOoda defines 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 explains. The weighted average “around the clock U.S. wholesale industrial power price (5 markets) of $38.90 / MWh leads to an aggregate spread of $418,” the report added.

The report further noted that the older-gen S9-class devices “saw their Hash Spread™ down ~9% to $90/MWh. S17-class devices, the bulk of the installed base, saw a hash spread of about $295/ MWh.”

BitOoda also mentioned:

“We estimate that the Bitcoin mining network currently consumes about 3.7GW of power. Excess rigs over available power should accelerate the retirement of older-gen equipment in the coming months. The 75 MWh required to mine 1 BTC with S19-class rigs translates into $2,918 in power expense. It costs $10,377 using S9 rigs, a ~70% margin, excluding labor.

The main takeaways from the report are as follows:

  • Mining economics have “maintained its improvement since last week following the reset”
  • Chinese miners are “seeking sites to which to direct future equipment deliveries, but infrastructure bottlenecks should lead to 2+ years of better mining economics relative to our prior estimates”
  • “We 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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