New Year, New Bitcoin ATHs, New hashrates!
Key Highlights
- Hashrates and Difficulty are slowly creeping upwards
- Daily total miner revenues are still below that of 2017’s ATH
- Keeping the network warm and hot with the Thermocap measurement
- Hashrates as an asset class are becoming more important
First and foremost, Happy New Year and “sayonara” to the year of 2020. Many in the crypto-verse were hoping for a good start to the year of 2021 and we sure did get one with bitcoin ripping up over $40k, representing about a 35% jump from the end of December when prices were touching the $30k level. To even the most diehard bitcoiners, this sporadic jump was surprising giving way to new predictions by other analysts of $100k by sometime later this year.
But since then prices have cooled down dropping to a current level of around $35k with potential upswings still in the foreground. Hashrates have steadily been creeping up the past 2 weeks showing a current level of global total hashrates to be gyrating along the 150 EH/s mark. As we have written in our last bi-weekly miner update, orders for mining rigs have been in such a backlog with the bottleneck at the manufacturing point. This bottleneck has been the key resistance to hashrates growing at a much slower rate than the price itself. The slow increase in hashrates the past 2 weeks has been the driver to the bump in difficulty but we expect the difficulty to still plateau for a few weeks now.
Out of all the charts that either show we are at ATHs or not yet at ATHs, one chart has been overlooked and it is the total miner revenue capture. The chart put forth below is a visual representation of the daily miner rewards, which includes block rewards and transaction fees (which are through the roof right now). Despite prices nearly doubling since the 2017 high, miner revenue hasn’t yet touched its all time peak back in the 2017 bull run. Recently, total daily miner revenue has topped $42 million, $14 million shy of the 2017 peak of about $56 million. Therefore we could expect another sudden surge in price to bolster that daily total.
One of the obvious reasons total miner revenue hasn’t hit its ATH in 2017 is due to the halving. But if prices and transaction fees keep increasing, expect miner revenue to also increase. And this is something we all should be grateful for and we don’t take it for granted. Read our past Life of a Miner diary series to see the philanthropic efforts we partake in within the communities our mining farms are located in.
The Thermocap measure was brought forth by Nic Carter as a way to visualize how much money the bitcoin community has spent to keep the network secure. Or how much the network has been worth to its maintainers (us miners), in real cash. For those who aren’t familiar, the bitcoin network utilizes proof-of-work to achieve consensus and prevent double-spending situations through digital ASIC mining. As miners we understand this as a lot of capital and effort is used to demonstrate our own proof of work. In aggregate total historically, the total security, mining efforts through Proof-of-Work, has been compensated over $20 billion for keeping the network secure. Without the miners, there could be not a secure network.
“The truth is that blockspace is a service which is paid for, and that’s where its resource cost is derived. Something duly purchased cannot, by definition, be a waste. Its buyer derives benefit from its existence, regardless of anyone else’s subjective opinion of the merit of the transaction.” — Nic Carter
Recently there has been a lot of chatter surrounding the introduction of hashrate tokens from the Poolin which not only allows you to purchase their hashrate token but also earn a governance token. This is an interesting initiative as more and more mainstream people want to get involved with mining but logistically and financially are not able to access large amounts of capital to build state of the art data centers. But this is actually something not new…we’ve been providing hashrate contracts for the past year and our clients love it! The coming wave of financial hashrate markets are only beginning to crack the surface. As Anicca Research pens it down in the series “The Alchemy of Hashpower”,
“In Bitcoin, anyone can sustain Bitcoin’s heartbeat by contributing computations, and in return gets rewarded with a share of the economic value. Hashpower secures the Bitcoin network, and the economic value of hashpower in turn is fundamentally driven by the activities on the network. This is how the Bitcoin paradigm connects energy with digital information. This is the Yin-Yang duality of hashpower…Despite its short history, investing in this asset class has grown popular. A number of mining special purpose vehicles (SPV), verticalized institutional mining projects, and mining infrastructure / service providers, mining-related financial contracts were launched to satisfy the demand.” -Anicca Research
Considering mining rigs are becoming more expensive, with a current lack of supply and long order turnarounds, investing in hashpower gives that direct easy access to this burgeoning asset class. With reports of an ongoing bidding war for the newest generational mining rigs, the smaller miners are being priced out with a tendency to perhaps take a stab in investing through online platforms providing hashrate contracts. In the same sense, hashrate contracts can be equivalent to derivative or option contracts in the traditional spot markets. It’s only a matter of time when we see more public interest in them.
And speaking of the word “public”, it is reported by Colin Wu that microBT is preparing to go public with an IPO this year in the US stock market. Although the exact date hasn’t been released yet, this will be the second largest mining rig manufacturer to go public after Canaan back in 2019.
About Valarhash
Chengdu-based Valarhash integrates mining machine sales, miner hosting, mining pool, and mine construction services. Led by CEO Fiona Lv, Valarhash aims to provide users with transparent and beneficial mining plans using advanced technology, with lower barriers of entry. Business operations cover hardware research and development, digital asset transactions and 1TMine hash power contract sharing. With a leading position in the hash power market, Valarhash integrates frontier resources with global vision, providing crypto compute service (CCS) and linking physical and digital worlds with blockchain technology.
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Email: BD@vhash.io
