ON–235: Zoomed-in on Bitcoin Mining 🔬

Deep onchain coverage on Bitcoin Mining.

May 23, 2024

ON–235: Zoomed-in on Bitcoin Mining 🔬

📝 Editor’s Note:

Today we’re publishing our 2nd installment of Zoomed-in, a new onchain deep dive series from OurNetwork.

Each Zoomed-in issue is authored by one of the marquee contributors from our analyst community. It will feature a deep dive on a single project of their choosing, going deeper than a standard OurNetwork issue.

One inspiration for this series was The Players’ Tribune, a sports publication allowing readers to hear directly from professional athletes in their own words. Our hope is that we can create a similar platform to enable the industry’s top onchain analysts to reach a larger audience.

You can sign up to be a contributor here or ping the Editorial Team (TG: @ofernau) to register your interest in authoring zoomed-in coverage. We are always interested in featuring independent analysts looking to make a name for themselves.

Okay let’s zoooooooom in.


Bitcoin Mining ⛏️

The network at a glance: Bitcoin remains the crypto ecosystem's largest Proof-of-Work blockchain, with billions invested across mining hardware, rackspace, & energy infrastructure. Though hashrate has increased more than 70% over the course of the past year, the impacts of the 2024 Halving now strain the growth of the industry. Despite pulling in $34M+ in daily revenue, a large segment of miners are operating near breakeven, and even the most efficient ASICs barely turn a profit at industrial electric rates. Transaction fees remain negligible at ~5% of total earnings, though some mining pools are now employing sophisticated strategies for maximizing their capture of the highest-bidding transactions. Still, a large-scale flush out of miners is yet to occur, with firms aggressively expanding their fleets in anticipation of rising BTC price and increased on-chain activity.

Parker Merritt is a Solutions Engineer and research contributor at Coin Metrics, specializing in topics such as Bitcoin mining and on-chain flows. In his free time, Parker contributes to content strategy at the Bitcoin Mining Museum, tinkers with home mining ASICs, and analyzes publicly-traded mining firms.

① Bitcoin Network Health 🫀

📈 Mining revenue collapses to $1.37K/MW, the lowest levels since FTX's collapse

  • Bitcoin mining’s main health indicator is hashrate, a.k.a. the total compute power securing the network. After a massive 3-year uptrend, hashrate (30D MA) is faltering post-Halving, dipping 4% from the all-time-high of 625 EH/s. On May 6, Bitcoin’s biweekly difficulty adjustment kicked in, giving miners some breathing room by dropping the work required to find a block by 5.6%. Still, the next adjustment is set to tick upwards 1%, once again putting mining margins under increased pressure.
Source: Coin Metrics
  • Hashprice (USD earnings per unit of hashrate) is a key measure of miner revenue. Due to improved ASIC efficiency & increased competition, hashprice generally trends lower over time, reaching a new low of $0.045 per TH/s in May. Short-term transaction fee spikes can boost hashprice— the Runes launch on the Halving block briefly sent hashprice to $0.19 per TH/s, with a record 75% of revenue coming from fees. Onchain activity has since slowed, with fees contributing 5% of revenue in the past week.
Source: Coin Metrics
  • In aggregate, miner revenue remains elevated at $34M daily, higher than the sector’s top-line income for most of 2022-2023. However, revenue should be measured relative to electric input— year-over-year, mining consumes approximately 1.6x more power. Adjusting for power usage, miner revenue per megawatt has reached its lowest level since FTX’s collapse, with $1.37K earned daily per MW. This scarcely outpaces the cost of consuming 1 MW at an ultra-low power rate of $0.04/kWh (around $960 daily).
Source: Coin Metrics

② Zoomed-in: ASIC Economics 🔧

📈 Aging ASICs drop 80-90% from their peak prices, operating close to breakeven at industrial power rates

  • Power costs (quoted in $/kWh) are miners’ primary operating expense. Depending on an ASIC’s daily USD revenue, the “rational” shutdown threshold for each machine can be directly measured. At current hashprice, Antminer S19s (making up ~25% of network hashrate) breakeven at $0.06/kWh, well below the average U.S. industrial rate of $0.078/kWh. For residential miners at an average rate of $0.16/kWh, even the S21— Bitmain’s latest model— is unaffordable to operate at a breakeven rate of $0.12/kWh.
Source: Coin Metrics
  • The 2021 bull run triggered an influx of “retail” miners, with individuals rushing into hosting services to capitalize on outsized profitability. ASIC demand was clearly reflected on secondary markets like Kaboomracks, where ask prices for Antminer S19 models (90-110 TH/s) reached as high as $100/TH. In 2022, however, retail miners exited the market en masse, with ASIC premiums collapsing by -80%. Post-Halving, capitulation continues, with most “vanilla” S19s now trading in the $4-5/TH range.
Source: Coin Metrics

③ Zoomed-in: Mining Pools 🏊‍♂️

📈 The top 2 mining pools control > 50% of the market, though smaller pools earn an edge on transaction fees

  • Given Bitcoin emits only ~144 blocks daily, mining pools help smooth sector revenues by sharing rewards across a large constituency of miners. In recent years, pool dominance has become quite centralized— Foundry now commands a 28% share, with AntPool close behind at 26%. Some small pools have emerged as a counterbalance (SpiderPool rose to the top 10 in under 3 months with 2% share), but lopsided pool dominance remains a glaring gap in Bitcoin’s defense against censorship & disruption.
Source: Coin Metrics
  • Not all pools are built equal— some are notably more effective at capturing high-paying transaction fees. ViaBTC was the lucky pool to claim the Halving block with 37.63 BTC in fees, but MARA Pool has gained a slight edge by facilitating “non-standard” transactions (i.e. extra-large Inscriptions) for an extra fee. Taking the weekly average fees per block in 2024, MARA ranked highest in 5 of 21 weeks so far, with F2Pool taking 2nd place with 3 weeks spent as the top pool by average fee earnings.
Source: Coin Metrics

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