Bitcoin Mining Ecosystem Evolving Rapidly with BTC Price Remaining Unpredictable Input to Capital-Intensive Business Model – Report

In the wake of the Halving, Bitcoin’s hashrate (30D MA) has “fallen -7% from its all-time-high of 626 EH/s, now at 580 EH/s,” according to an update shared by Coin Metrics earlier this week.

In its extensive crypto and blockchain industry report, Coin Metrics pointed out that “a massive UTXO consolidation by OKX provided a brief boost in transaction fee revenue, with miners earning $38M in fees over a 3-day period.”

Coin Metrics further noted that Toronto-based miner Bitfarms has made “impressive improvements to fleet efficiency, lowering incremental energy consumption from 35 to 27 J/TH in 2024.”

Coin Metrics also mentioned, earlier this week, that after trading as high “as $100/TH at the height of the 2021 bull run, Antminer S19s now trade as low as $2.5/TH on secondary markets.”

Coin Metrics’ State of the Network is now revisiting in detail the Bitcoin mining landscape, continuing their regular updates on the state of proof-of-work stakeholders. Since the Bitcoin Halving in April, mining margins have faced pressure “due to a stagnant BTC price and a subdued fee market, though short periods of on-chain congestion have provided some revenue relief,” the Coin Metrics team noted.

The research report added that many operators are “diversifying beyond pure-play mining, reinventing themselves as generalized infrastructure providers in an attempt to secure hosting contracts for power-hungry AI applications.”

At the same time, improvements in chip efficiency “continue unabated, forcing miners to contemplate whether to push forward with aging ASIC hardware or perform comprehensive fleet upgrades,” the Coin Metrics report added.

From a first glance, Q2 2024 was “a relatively lucrative period for Bitcoin miners.”

Of the 18 quarters since Jan. 2020, this quarter “ranks 5th in terms of total USD revenue earned, with miners bringing in $3.77B between block subsidies & transaction fees.”

Coin Metrics also mentioned that “due to the Halving, these earnings were front-loaded, with nearly half of the quarter’s revenue coming in during April alone.”

After the Bitcoin block reward dropped from 6.25 to 3.125 BTC on April 20 and the “Runes” token hype “gradually eased in the weeks that followed, May and June were far more difficult months for miners.”

As a result, Bitcoin’s hashrate “shows signs of miner capitulation— at 580 EH/s, the 30-day moving average of hashrate is -7% off the all-time-high of 626 EH/s.”

Coin Metrics further noted that despite the overall loss of revenue momentum, “unexpected increases in on-chain traffic have still offered miners some reprieve.”

In early June, the Bitcoin mempool was “slammed with a massive influx of high-fee paying transactions, with the average hourly transaction fee reaching as high as $945 by mid-day June 7.”

The congestion provided a major boost “to mining revenue, with hashprice (daily USD revenue per TH/s) spiking to $0.09 and fees contributing over 42% of earnings.”

Coin Metrics pointed out that “while fee spikes are often attributed to token protocols like Ordinals & Runes, the latest mining revenue boost was brought on by the internal operations of a single centralized exchange.”

OKX (the 4th largest exchange by BTC spot volume) performed a massive series of “UTXO consolidations,” cleaning up their books by “combining fragmented fractions of Bitcoin into larger, more compact denominations.”

Coin Metrics explained that since BTC transactions are “priced according to the blockspace they consume, transactions involving many UTXOs are more expensive to transfer, whereas ‘consolidated’ UTXOs unlock payments with a lighter and more cost-effective on-chain footprint.”

The report also noted that UTXO consolidation process is similar to “dumping a jar of loose change into a coin-counting kiosk in exchange for a $20 bill.”

Like Coinstar, however, this service “comes at a cost.”

Coin Metrics further noted that “while daily fee revenue typically ranges around $1-2M, miners raked in nearly $38M in the 3 days following OKX’s UTXO consolidation.”

In retrospect, OKX could have “executed their accounting cleanup in a more efficient manner, having paid a significant premium for expedient settlement— but in the face of a quiet transaction queue and record-low hashprice, miners certainly aren’t complaining.”

In the weeks since Bitcoin’s Halving, the majority of publicly-traded mining companies “have meandered sideways alongside BTC. Shares of the 3 largest miners— Marathon Digital (MARA), CleanSpark (CLSK), & Riot Platforms (RIOT)— have struggled to outperform BTC in Q2, with only Marathon managing to eke out a small relative return.”

As Bitcoin miners begin to liquidate their existing hardware fleets in favor of more efficient models, ASIC prices “have tumbled in tandem,” the Coin Metrics report noted.

While nominal prices vary widely based on hardware specs, ASIC trading desks typically quote orders in “dollars per terahash” ($/TH) terms, providing “an easily-comparable metric for measuring premiums across a variety of models.”

The Coin Metrics report also mentioned that Bitcoin’s 5th epoch looks likely to be “characterized by consolidation, with well-capitalized miners buying up the assets of less-efficient operators.”

The report added that the AI sector is also “enviously enamored with the industry’s unique access to energy infrastructure, and many publicly-traded miners have seen success in embracing a more generalized datacenter strategy.”

Others remain laser-focused “on Bitcoin, treating the HPC sideshow as a momentary distraction.”

Regardless, Coin Metrics concluded that “surviving the onslaught of efficiency gains and competitive pressures requires all miners to turn their sights towards the future, with the long-term trajectory of BTC price remaining an unpredictable input to a highly capital-intensive business model.”



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