Introduction:
Luxor Technology’s latest Hashrate Index Q1-2024 Report examines the Bitcoin mining industry after the Fourth Bitcoin Halving. This report offers critical insights into key metrics such as Bitcoin Hashrate, Hashprice, Hashrate Forwards, and Bitcoin Mining Stocks, highlighting the Bitcoin mining industry’s adaptability – and also the challenges that lie ahead for miners in a 3.125 BTC block subsidy world.
Hashrates and Hashprice of Bitcoin Fluctuate
Bitcoin miners are now focused on two key metrics: the hashprice (the price of bitcoin) and the network hashrate.
Hashprice measures how much money miners earn each day by hashing in a mining pool that pays per share. If all else is equal, then we can expect that the Bitcoin block subsidy will be halved, resulting in a doubling of the hashprice.
But it didn’t take place immediately. Hashprice fluctuated wildly in the weeks leading up to and following the Halving. The hashprice fell to $74/PH/Day in the first hour after the Halving. However, it quickly soared to $183/PH/Day as the transaction fees from Runes trading exploded. Runes’ hype was brief, as hashprice quickly fell to a low record of $44/PH/day. Then it stabilized around $50/PH/day. Prior to 2022’s FTX scandal, the hashprice was $55/PH/day. This new low underscores how difficult the economic situation is for today’s bitcoin miners.
This leads us on to the second major metric the Halving has affected: Hashrate. In Q1-2024, Bitcoin’s average 7-day hashrate increased by 19%, to 611EH/s. It would then increase again in April to 650EH/s. Bitcoin’s Hashrate dropped 10% after the Halving to reach 580 EH/s.
Given that mining margins are compressed and summer is upon us – which will likely necessitate power draw curtailment from industrial-scale mining farms in places like Texas, a headwind for hashrate growth – we should expect Bitcoin’s hashrate to experience only marginal growth this year.
Hashprice Trades in Contango
Notably traders on hashrate market believe that hashprice is at its bottom (for now).
Luxor’s Hashrate Forwards (a Bitcoin derivative that allows participants to purchase and sell hashrate at fixed prices in future) are in contango. That means hashrate traders anticipate the spot price to rise in the next few months. It is clear that Hashrate Forwards are trading in contango, which means traders expect the price of hashrate to increase over time. This could be due to an increased transaction fee or decreased mining difficulty.
We stated that a temporary shutdown of hashrate in hotspots such as Texas may improve hashprice.
ASIC Markets Undergoing Price Discovery
ASICs experienced significant price reductions as Halving approached. Price drops were seen across all models, despite the fact that Hashprice was higher in Q1-2024. The Antminer S21’s price premium to the other models has increased. This is not surprising, as Bitcoin miners are shifting to more efficient hardware in order to offset the drop in revenues post-Halving.
Bitcoin Mining Stocks in a Hashrate and Efficiency Arms Race
All of the major Bitcoin mining companies increased their hashrates throughout 2023. However, some miners took more aggressive measures to increase their hashrates during 2024’s early months. It is important for miners, with the block subsidy halved now, to upgrade their ASICs fleets in order to be competitive on the market and to lower operating costs.
Forecasts for the year 2024
In the absence of a substantial increase in Bitcoin’s price or a bullrun on transaction fees, 2024 will prove to be challenging for Bitcoin miners. More than ever before, the transaction fee will play a crucial role in a bitcoin miner’s bottom-line.
If you want to adapt to the new reality, then those who did not do it in 2023 are going have get more creative. In addition to optimizing the power efficiency of their fleets with the latest ASICs and getting more favorable power contracts they can also use after-market software to optimize their ASICs. They can even adopt sophisticated hedging and find alternative revenue streams and places to reduce operating costs.
As companies seek to benefit from fire sale pricing on ASICs or mining equipment, consolidation is expected in North America. Mining will continue to grow and become more integrated into energy systems as the sector matures. We believe the current Halving period will speed up this integration, with miners looking for the lowest cost electricity.
This is a guest post by Alessandro Cecere & Colin Harper. Opinions are solely theirs and may not reflect the views of BTC Inc.
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Source: bitcoinmagazine.com
