Hash Rate Hits New All-Time High: Implications For Mining Equities

Bitcoin’s hash rate endured a series of significant price drawdowns, yet emerged higher than before. We review the recent explosion in hash rate and look at potential implications for the industry.

Relevant Past Articles

• 12/21/21 - On-Chain Mining And Public Miner Performance

• 6/29/22 - Mining Hash Price Bear Market

• 7/5/22 - Public Miners Start Selling Bitcoin Treasuries

• 7/11/22 - When WIll The Bear Market End? 

• 7/26/22 - Bitcoin Hash Rate Plummets 17% From All-Time High

New Hash Rate All-Time High

Just two months ago, the 2022 expansion in Bitcoin hash rate was looking bleak. The bitcoin price had plummeted, miner margins were getting compressed, large public miners were shedding bitcoin holdings and it was a ripe time to revisit the state of miner capitulation in the market. Fast forward to today: price has come down from a massive bear market rally to $25,000 while hash rate coming online has exploded to a new all-time of nearly 250 EH/s. The chop and range and rallies in bitcoin price haven’t impacted the hash rate from ripping higher this year. Hash rate hasn’t really declined on a 30-day growth basis since July. 

One of the biggest drivers of the expansion is the follow through from large public miners who already planned out and capitalized plans to bring substantial hash rate online last year. We noted in a public miner piece from October 2021:

As it stands from public miner reporting, the top eight public mining companies currently control 10% of all the network hash rate, currently around 15.19 EH/s. But the kicker is that they are only just getting started. As an overall group, they have published plans and goals to grow their hash rate by 267% from now through 2022, which would bring their total collective hash rate to 55.82 EH/s. Both Marathon Digital Holdings and Core Scientific, the two largest North American miners, will account for nearly half of this growth, both planning to 5x their current hash rate.

Looking back at this data and measuring where public miners are today, most of this expansion has gone on as planned. Core Scientific hit their initial projected hash target to 13.0 EH/s already along with Hut 8 to 3.0 EH/s. Other miners like Marathon haven’t hit their goals yet but have announced expectations for 6.9 EH/s additional hash rate to come online in the next 60 days and expectations that 23 EH/s will be hit in the middle of 2023. Bitfarms just hit a hash rate of 4.2 EH/s up from 1.53 EH/s and Riot has actually raised their goal to 12.5 EH/s by Q1 2023. 

Chart from our 10/22/21 - Public Miner Analysis

That’s some of the best public data available to chalk up why bitcoin hash rate has exploded so much. It’s public miners executing on expansion plans. But that doesn’t mean large-scale mining companies haven’t faced additional pressures. Compute North, one of the largest data center operators and bitcoin mining hosting services, filed for Chapter 11 bankruptcy just weeks ago. They housed miners for companies like Marathon Digital, Compass Mining and Bit Digital across 84 different mining entities. A major auction on the bulk of Compute North existing assets will take place on November 1, 2022 including mining containers, machines and entire data centers. 

In the Celsius collapse, Celsius Mining also filed for bankruptcy back in July. That said, it’s clear from the recent Compute North’s bankruptcy that the pressure is still on large-scale miners.