At the end of May I wrote
One Heck Of A Halvening about the aftermath of the halving of Bitcoin's block reward on April 19
th. Six weeks later it is time for a quick update, so follow me below the fold.
All the graphs in this post are 7-day moving averages, to filter out some of the noise. The first shows what the halvening did to the hash rate. Before the halvening it was around 620EH/s. Except for a spike up to 657EH/s on 26
th May, after the BTC "price" hit nearly $71.5K, it has hovered around 580EH/s. Since power is the biggest cost, the miners' costs have dropped up to 6.5% since the halvening.
The second graph is much more dramatic. It shows miners' revenue dropping from around $70M/day before the the halvening to around $30M/day after, a drop of 57%. So with costs down 6.5% and revenue down 57% their margins have taken a huge hit.
Back in May I
wrote:
Lets start back in October when the Bitcoin "price" was in the high $20Ks. This was a problem, because only the most efficient miners could make a profit at that "price".
Mysteriously, that was when Tether's money printer started running at full speed, and the "price" got pumped up to around $70K. If I'm right that only the most efficient miners could make money with the "price" in the high $20Ks, and if their (income - costs) has dropped 50%, the most efficient miners need the "price" to be in the mid-$50Ks. Mysteriously, the mid-$50Ks is where the "price" has dropped to, down 21% since its last peak on June 5
th.
That the hash rate was broadly flat after the halvening is interesting. Before the pre-halvening pump started, with the BTC "price" roughly flat, there was a slow but steady increase in the hash rate reflecting Bitmain's shipments of new, efficient chips displacing a smaller contribution from older chips being turned off. Bitmain's shipments continued, but once the block reward was halved many more of the less efficient chips should have been turned off, and the hash rate reduced. This didn't happen, and I can see two possible explanations:
- It may be that mining power is highly skewed, with the vast majority coming from the latest chips running on low-cost power which are still profitable after the halvening. Then the shutdown of a huge number of older chips sucked in by the pre-halvening pump would have had only a small reduction in the total hash rate.
- It may be that miners are burning their excess profit from the pre-halvening pump by staying in the market rather than pivoting to AI, each hoping to be among the survivors from the eventual cull.
Another feature of the halvening was a massive spike in transaction fees to over $40/transaction. The third graph shows this spike, and a smaller one around the peak in the BTIC "price". But it also shows that right now no-one wants to transact, because the average fee is now $1.72. So the miners are once again almost entirely dependent upon inflating the currency with block rewards.
The last graph shows the total cost of a transaction. It shows that the fee spike around the "price" peak made little difference, The current average cost per transaction is $48.57, of which $1.72 is the fee. So the system is 96.5% supported by inflation; there is currently no risk of the dangers associated with
Fee-Only Bitcoin.
5 comments:
Olga Kharif's Bitcoin’s Latest Existential Question: Too Much Supply or Not Enough? concludes:
"Perhaps the takeaway should be that the Bitcoin supply-demand situation is fragile and easily tipped, since a single market participant can often have an outsized amount of sway over the coin’s price. The irony is that when Bitcoin debuted in 2009, the original selling point was that it was outside of government control. Now a decade and half later, various governments — including the US, China, United Kingdom, Ukraine and Germany — own about $31 billion, or almost 3% of all the outstanding Bitcoin, according to BitcoinTreasuries.net.
At the same time, a similar amount of Bitcoin changes hands almost on a daily basis on exchanges across the globe."
Julie J. writes in Bitcoin Hashprice Hits Record Low – Is a New Miner Crisis on the Horizon:
"Bitcoin’s hashprice, a crucial metric that measures the revenue miners earn per unit of computing power, fell to an all-time low of $40 per unit per day on August 8, 2024. This decline is notable not only for its severity but also because it surpasses the lows experienced during the 2022 crypto winter. During that period, hashprice had bottomed out at $60 per unit, reflecting the severe challenges faced by miners amid a tumultuous market environment.
The current hashprice drop has had a profound impact on miner revenue. According to data from YCharts, the daily revenue generated by Bitcoin miners decreased sharply from $40 million on July 29 to approximately $24 million by August 7. This significant reduction in earnings highlights the mounting financial pressures on miners, who are struggling to maintain profitability in the face of declining hashprice."
Jonathan Randles and Dorothy Ma report that Celsius Creditors Explore Liquidation of New Bitcoin Mining Firm:
"Joseph Sarachek, a lawyer representing some Celsius creditors, told a New York bankruptcy judge Tuesday that his office has been contacted in recent weeks by “numerous shareholders” who have inquired about forcing a liquidation of Ionic’s assets. A different Celsius creditor said during the court hearing that other shareholders are attempting to rally support to remove Ionic’s board of directors.
...<
Ionic is cash flow positive and has about $200 million in cash and cryptocurrency, Pesce said.
The plan had been for Ionic to become listed on the Nasdaq Stock Exchange by the middle of this year, but it’s yet to happen following the May resignation of auditor RSM US and as former Chief Executive Officer Matt Prusak departed earlier this month after his contract expired."
Molly White reports that Bitcoin mining company Rhodium Enterprises files for bankruptcy:
"The Texas-based Rhodium Enterprises bitcoin mining company has filed for bankruptcy, disclosing debts between $50 and $100 million and total assets between $100 and $500 million. The company had tried to begin restructuring, but was not able to reach agreement among shareholders, and so decided to enter bankruptcy.
Bitcoin mining has been an extremely challenging business in recent times, partly due to volatile crypto prices over the last few years, and due to diminishing miner rewards following the April halving event."
The Economist explains Why Texas Republicans are souring on crypto. In 2021:
"many crypto miners, including Riot, signed contracts with energy suppliers that locked them into fixed rates for up to a decade. Several years later, that decision looks to have been a clever one on their part.
...
On the hottest and coldest days, when demand for electricity peaks and the price rockets, the bitcoin miners either sell power back to providers at a profit or stop mining for a fee, paid by ERCOT. Doing so has become more lucrative than mining itself. In August of 2023 Riot collected $32m from curtailing mining and just $8.6m from selling bitcoin.
...
Yet a business that benefits financially from the state’s crisis and has lobbied against power-market reforms may no longer be the governor’s first choice to stabilise a grid facing mounting pressure. These days, assuring anxious Texans that their lights will stay on when the weather gets bad is a top priority, says Brian Korgel, head of the Energy Institute of the University of Texas at Austin. If Texans blame bitcoin miners, rightly or not, their leaders will too, he predicts.
Last year a bill to restrict the miners from taking part in the “demand-response” scheme passed in the Texas Senate but stalled in the House. Crypto insiders expect lawmakers to bring more such “bad bills” come January."
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