Parker Merritt and Kyle Waters from Coin Metrics have provided a close examination of the current Bitcoin mining landscape through the lens of their extensive data.
Despite a flat BTC market in the back half of Q3 as spot ETF chatter quieted, hashrate continued “to accelerate throughout the quarter, recently hitting a new high of around 400 EH/s from 250 EH/s at the beginning of 2023.” Coin Metrics researchers also mentioned that the hashprice conditions “remain challenging, yet savvy miners continue to add operational hashrate.”
Since the 2021 mining ban in China, the US has “emerged as the clear focal point of a maturing Bitcoin mining industry.”
Financed by “the strength of US capital markets, publicly-traded mining companies and their required disclosures are a great place to gauge US hashrate trends,” the Coin Metrics report noted.
Marathon (NASDAQ:MARA) reported that its operational hashrate “grew to 17.7 EH/s through Q2 ‘23 (almost 5% of the total network hashrate), up from 11.5 EH/s in Q1.”
On a total installed basis, the company also “reported 23 EH/s installed in the US, with a target of 30 EH/s of total anticipated hashrate.” Riot Blockchain (NASDAQ:RIOT), another US-based miner, similarly “reported growth in deployed hashrate from 4.8 EH/s in August 2022 to 10.7 EH/s as of August 2023.”
After a “punishing” 2022, mining stocks have mostly “rebounded in 2023 alongside BTC.”
Coin Metrics added that another positive trend “for US miners is subsiding inflation pressures, with US energy prices falling YoY nationwide (per US EIA data ending in June).”
With the next halving less than a year away, US miners “are ramping up production while also managing their fleets ahead of the inevitable decline in block rewards come next spring.”
Coin Metrics can see this in the data “on the average network wide efficiency, which has continued to trend towards a more efficient overall network (per Coin Metrics Labs’ MINE-MATCH).”
Generally, US miners are “deploying more modern machines, leading to a continued increase in network wide efficiency.” The maturation of the mining industry “has implications elsewhere, though.” For example, concentration of hashrate “in the hands of a few massive mining pools remains a major concern for the Bitcoin community.”
Foundry and Antpool have “controlled north of 50% of Bitcoin’s hashrate, posing ever-greater centralization risk.” Though Foundry’s dominance has softened “to 29% from the high of 34% in February, Antpool is inching forward, gaining 5% share over the same period to reach 23%.”
As additional ecosystems begin to anchor themselves to Bitcoin’s proof-of-work, mining pools will “have strong incentives to circumvent the mempool and pocket the proceeds.”
Coin Metrics concluded:
“Miners will be forced to demand a higher level of transparency from their pools.”