Quick take;
- Bitcoin hash rate approaches record highs as rumors emerge that some Chinese miners have deployed the latest generation of miners
- European and North American currently can’t acquire the latest generation of ASICs at reasonable prices
- Hash rate is expected to decline post-halving with industry professionals estimating decreases in the range of 13% to 60%.
Miners with SHA256 ASIC mining rigs are competing for the entire pool of SHA256 rewards. Block subsidy halvings on the Bitcoin Cash and Bitcoin SV networks have reduced this pool of rewards but the biggest reduction is yet to come.
With the Bitcoin block subsidy representing the vast majority of SHA256 rewards available to miners, the halving will put many SHA256 miners under existential threat. If the Bitcoin Cash halving is an indication of how Bitcoin miners will be impacted, it is likely that the vast majority of miners will be unable to continue mining with S9-generation hardware.
Gross Margins Squeezed For Bitcoin Cash Miners
Since the Bitcoin Cash halving, S9-generation hardware has become unfeasible for most miners to deploy on the network. At $0.05 per kWh, electricity costs alone are exceeding the estimated daily return for deploying S9 mining rigs on Bitcoin Cash.
Immediately after the Bitcoin Cash halving, profitability for even recent generations of hardware was poor. Generations of mining rigs released in late 2019 and early 2020 had gross margins of just 10%.
However, hash rate for Bitcoin Cash quickly dropped post-halving, resulting in increased margins for mining on the network after difficulty adjusted to reflect the reduced computing power. In contrast to Bitcoin, Bitcoin Cash employs a dynamic difficulty adjustment algorithm which rapidly adjusts to reflect changes in hash rate.
Since difficulty adjusted, gross margins for recent releases of mining rigs have increased. Data from F2Pool currently estimates that the gross margin for Antminer S17+ is 48% at an electricity cost of $0.05 per kWh.
Factors Fueling Bitcoin Hash Rate Rise
Hash rate for Bitcoin has recently been on the rise and is approaching record levels of 123 EH/s observed in early March. The seven-day moving average of hash rate is currently estimated to be 119 EH/s.
Several factors could be playing into this hash rate rise. Some of the increase is likely attributable to deployment of the latest generation of ASIC mining rigs, the Antminer S19 series and the Whatsminer M30S. While this generation of rigs was announced earlier this year, they have yet to be widely distributed to miners.
In a mining-focused discussion hosted by Bitcoin Magazine and Luxor Mining, Poolin VP Alejandro De La Torre noted that there are rumours that some Chinese miners have been able to acquire and deploy this latest generation of hardware recently but further outlined that miners outside of China are currently unable to acquire these rigs at a reasonable price.
“Noone can get them out of Asia… Noone in Europe or the US is able to get these new miners or if they can, it’s very expensive so they probably don’t.”
Market conditions have also been more attractive for Bitcoin miners recently. The below price chart captured on the 9th of April illustrates price increasing since difficulty recorded its largest downward adjustment since ASICs began mining on the Bitcoin network. Price has since declined to roughly $7,050 at the time of writing.
Both the Bitcoin Cash and Bitcoin SV halvings also contribute to the increase in Bitcoin hash rate. The block subsidy declining on these networks increases the relative attractiveness of directing hash power at the Bitcoin network.
Post-Halving Bitcoin Hash Rate
The Bitcoin halving is roughly 25 days away at the time of writing. The consensus among miners is hash rate will certainly decline post-halving. Estimates of declines from the Bitcoin Magazine miner discussion ranged from 13% to 60%. Former CEO of Bitfarms Wes Fulford anticipates a 50% to 60% decline in hash rate if current market conditions remain similar post-halving.
It is also widely anticipated that the vast majority of Antminer S9 mining rigs will be forced offline post-halving. Given that the Antminer S9 has been a widely used rig since its release in 2016, its obsolescence will majorly contribute to the hash rate decline. Alejandro De La Torro noted in the discussion that there have been estimates that the S9 has represented roughly 30% of Bitcoin hash rate. Research released by Blockware Solutions estimated that the Antminer S9 accounts for ~38% of hash rate. As very few miners are low enough on the cost curve to continue operating their S9 rigs post-halving, a significant portion of Bitcoin miners may be forced out of the industry entirely.
