First off, here at Valarhash and 1TMine, we would like to wish everyone a Happy Chinese New Year and that the Year of the Ox will give everyone a great fortune. Regardless of gender, that is cow, ox, or bull, most of the Chinese community is banking on the ‘bull’ to continue in the bitcoin markets as we dangle with the $50k level. And despite the whole country of China and other parts of Asia having the holiday off, miners continue to grind it out 24/7 without missing a beat. Therefore, here we bring you the next edition of our Bi-Weekly Miner Updates as a way to express our love for the community.
Speaking of love…Happy Valentine’s Day as well!
As always, we start off by analyzing hashrate trends as this is the basis of what miners provide to the Bitcoin network. The amount of total hashrate on the network continues to ablaze upwards with a record amount of hashrates nearing 200 EH/s in the past 2 weeks. Current levels see hashrates around the 160 EH/s level which would constitute about a 20% increase since the start of the year.
Impressive growth an outsider could say but still pales in comparison to the hashrate growth seen from 2013 to 2014 where hashrates exploded from around 50 TH/s to 300 PH/s in one year. That is a 6,000% growth in hashrates. We probably won’t be seeing that kind of short time frame explosive growth anytime soon considering the amount of capital needed just to onboard 1 EH/s of hashrates.
During Chinese New Year, it is customary to wish each other good fortunes by saying the Chinese phrase: 恭喜发财. And for our miners, their wishes have been granted true with total miner revenue reaching close to 2017’s ATH of around $40m. And on Thursday, February 11 UTC, miners experienced a record single-hour revenue of $4 million.
The best way to contextualize this is that the Bitcoin network is paying this amount to secure our network in the most decentralized way. It’s a recursive and reflexive relationship we need to understand. As the price goes up, so does miner revenue, which in turn increases the amount of new hashrates being added, which ultimately is a net positive to the increased activity of the network.
The PoW mining economics is one of the most innovative tools to Bitcoin and it’s not only limited to those with large amounts of capital. The monetization of hashrates and democracy around it has spawned up a large market for hashrate contracts.
For those who think bitcoin is way too expensive, we are actual right on course according to the popular Stock-to-Flow ratio model or S2F, for short. As of February 14, 2021 UTC, the S2F ratio prints a reading of $49,086.26 while current trading levels have bitcoin’s price at $48,747.45. The S2F has been the target of a lot of non-believers rebuttals but if anything, it does paint the best picture of where bitcoin is headed or could be headed.
And with Tesla and Mastercard announcing support for bitcoin, the S2F model doesn’t seem that farfetched anymore.
Quick Notes
As noted before, the race to add more hashrates keeps getting warmer as a report by Coindesk states that over 20k mining machines have been secretly set up in the cold climate of Sibera. Despite the fact that the narrative around the increased movement of miners in North America, Asia still seems to be the location where the speed, cost-effectiveness, and efficiency of onboarding hashrates are at their optimal.
The largest discrepancy of the mining network we have seen is the turtle-like slow growth of difficulty, despite bitcoin’s surging price upwards and the increased interest in mining. The pivotal bottleneck of this phenomenon probably stems from the fact that demand has ballooned oversupply. Meaning there are not enough mining machines to supply the actual market demand. Manufacturers and suppliers have been bogged down by large orders from those eye-popping headlines we have been seeing of institutions flooding into the mining game.
As Wolfie Zhao from The Block states, “The shortage of wafers from the world’s biggest semiconductor firms such as Samsung Foundry and TSMC have led to limited supplies of the newest bitcoin mining equipment from Chinese manufacturers despite increasing demand from their customers.”
This bottleneck of mining machine manufacturing could be the jump-off point where we see massive scaling of mining machine manufacturing from current providers and future providers. For a long time now, mining machine manufacturing could be categorized as an oligopoly of a few large players. Advocates have voiced their concern about this centralization of mining manufacturers but it is extremely difficult for a new player to spawn up to their own mining machines that could compete with the traditional ones in Bitmain and Canaan. Unless we see more competition in this sector, expect mining machine manufacturing to experience delays and lags during bull runs.
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
