In the State of the Network report, Coin Metrics continues their focused series on Bitcoin mining, spotlighting data across the crypto mining ecosystem.
According to the Coin Metrics update, mining stands as “one of the most intriguing parts of the digital assets industry, often capturing the interest of the public and enthusiasts.”
As the industry matures, crypto mining is moving well “beyond its hobbyist days,” the report claims.
With over a dozen publicly-traded mining companies “listed on American and Canadian stock exchanges, mining has now become a sector commanding the attention of equity analysts on Wall Street.”
The report from Coin Metrics added that this past year has “been an eventful one for Bitcoin miners, marked by a major expansion in hashrate across North America and the globe, accompanied with a surge in miner revenues—a welcomed departure from the challenges of 2022.”
This all occurs as “each block brings us closer to the next halving event in spring 2024.”
The race to mine fresh BTC before “the predictable cut in block rewards is intensifying.”
As stated in the Coin Metrics report, changes “to core mining infrastructure, regulatory discussions, new debates within the Bitcoin community, and advancements in miner efficiency all create a complex scenario for operators and analysts alike.”
480 Quintillion Hashes per Second
Bitcoin’s hashrate—a measure of the computational resources “being allocated to mining—surged in 2023.”
Hashrate has leaped “to 480 EH/s from 250 EH/s at the start of the year, boosted by publicly traded mining companies who took no rest in expanding operations throughout the bear market.”
As explained in the Coin Metrics report, improving market conditions “have helped miners regain the narrative, with total quarterly mining revenue exceeding $2B in Q2, Q3, and Q4 of this year, on the back of bitcoin’s 150%+ YTD climb over $40K.”
The Coin Metrics report added that the string of good news “was extended by an unexpected revival in the long-subdued Bitcoin fee market, with over $180M in transaction fees dished out to miners in Q2 and over $200M paid out so far this quarter.”
The cost side of the equation has “also improved, with industrial electricity rates coming down in the US. Even though average rates in the US have risen to $0.085/kWh from $0.075/kWh in April, they are still lower than the peak rates paid in 2022.”
Publicly traded mining companies (or simply the “pubcos” in industry parlance) continue to aggressively switch “on a selection of the most efficient and modern machines like the Bitmain Antminer S19 XP. With competitiveness rising (see analysis further along in this report) sustaining a modern fleet of ASICs has become essential for survival.”
But even as the good times roll, Coin Metrics points out that miners must “avoid complacency: in just about four months time Bitcoin’s next halving event will cut block rewards from 6.25 BTC to 3.125 BTC—as well as mining companies’ top lines. Miners are currently racing to collect the final Sats from blocks minting out 6.25 fresh BTC.”
Though the halving is “a predictable element of Bitcoin’s monetary design, it still presents a complicated calculation for operators managing substantial capital investments in physical infrastructure and computing resources.”
At the macro level, conditions vastly “improved in 2023 for Bitcoin miners. Even the fee market, which was frenzied in Q2, has returned in Q4. But along with it, a new debate is now gripping the Bitcoin community.”
The report added that Bitcoin miners’ wishes “for better hashing days were granted in 2023. But as the calendar turns over to 2024, the new year promises to be an important one for the industry.”
According to the Coin Metrics report, the 4th Bitcoin halving event “will undoubtedly test even the most savvy of operators, and may even spark consolidation among miners and push more vertical integration. But miners can’t get bogged down studying operational variables, as they will also need to keep abreast of political discussions.”
While 2023 was all about North American miners, it’s important “to remember that Bitcoin mining’s landscape is global and geographically fluid.”
The 2021 mining ban in China demonstrated “how quickly hashrate can shift in response to government action.”
New projects in other regions, “like South America and the Middle East continue to shape the global Bitcoin mining narrative, while some countries in Africa are quietly emerging as new hubs.”
The report concluded that “even as block rewards split in half, the strongest miners are poised to double down as the industry matures and grows.”