State Of The Mining Industry: Public Miners Outperform Bitcoin
State Of The Mining Industry: Public Miners Outperform Bitcoin
Even with the recent rise in the bitcoin price, public bitcoin mining stocks start the year with more impressive gains than the asset itself. Hash price rebounds but difficulty keeps climbing.
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Public Mining Update
It’s been a few months since our last update of publicly traded bitcoin mining companies. Now that the latest round of production updates for January are published, let’s dive in.
Looking at the high-level view of bitcoin holdings, we’ve seen a declining trend in holdings across public miners throughout 2022, from 46,930 BTC at peak in April 2022, to 31,892 in January 2023 — a 32% decline in 10 months. With Bitfarms, Core Scientific and Northern Data shedding their bitcoin, holdings across public miners are now largely concentrated in Marathon Digital, Hut 8 and Riot Platforms. These three miners make up nearly 87% of all bitcoin holdings on this list. Adding HIVE Blockchain makes that 94% across just four public miners.
Although public miners are estimated to make up over 20% of overall hash rate, their 31,892 bitcoin is relatively small compared to the estimated 723,000 bitcoin in all miner addresses today (4.4%). To get that estimate, we’re using Glassnode’s bitcoin balance in all known miner addresses today, less an estimate for Satoshi Nakamoto’s 1.1 million coins.
The trend of hash rate expansion is “up only” with public miners growing their hash rate by 129% over the last year. This growth has been a significant driver of overall hash rate expansion with the network hash rate recently reaching 300 EH/s and public miners making up nearly 25% of all hash rate on a given day. That percentage is understated as we’re not including all public miners, like Cipher and TeraWulf.
Mining Production Update Notes
Marathon made a statement about their choice to sell some bitcoin that the company mined, “With bitcoin production increasing and becoming more consistent, we made the strategic decision to sell some of our bitcoin, as previously planned, to cover some of our operating expenses and for general corporate purposes. We intend to continue to sell a portion of our bitcoin holdings in 2023 to fund monthly operating costs.”
In their announcement, they shared about places for further hash rate expansion. “The company still expects to have approximately 23 EH/s of capacity installed near the middle of 2023.”
Similarly, HIVE’s production update informed shareholders about bitcoin sales, “HIVE sells all of the Bitcoin earned from our GPU mining hashrate, with a focus to HODL the green Bitcoin mined from ASICs.”
Riot Platforms announced a delayed timeline for growing their hash rate, “Unfortunately, as a result of this damage, our previously announced target of reaching 12.5 EH/s in total hash rate capacity in Q1 2023 is expected to be delayed. We will provide additional updates as we obtain greater clarity on the impact to our planned deployment schedule. In the meantime, the remaining infrastructure build-out at our Rockdale Facility continues to progress, with Building E now at 50% completion and on track to be fully completed this quarter, and we are continuing to execute on the expansion at our Corsicana Facility.”
Iris Energy increased its mining capacity from 2.0 to 5.5 EH/s by using prepayments to acquire new miners.
In other public mining news, Hut 8 shared about a recent merger and their HODL strategy:
“On February 7, 2023, Hut 8 announced a merger of equals with U.S. Data Mining Group, Inc. dba US Bitcoin Corp (‘USBTC’) which is expected to establish the combined company as a large scale, publicly traded Bitcoin miner focused on economical mining, highly diversified revenue streams, and industry-leading best practices in ESG.
“We have been intentional and strategic in pursuing our HODL strategy: by building a large, unencumbered stack, we have afforded ourselves the optionality to strategically use a portion of it to cover operating expenses rather than having to seek other financing options with less attractive terms,” said Jaime Leverton, CEO. “I am confident that selling production while we focus on closing the merger with USBTC is the right approach, as we expect to create a strong self-mining, hosting, managed infrastructure operations, and HPC organization in the long term.”
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Hash Rate All-Time Highs
With some help from cost-sensitive miners turning rigs back on, Bitcoin’s mean 7-day hash rate has once again broken to new all-time highs, with a weekly average of 303 EH/s.
Bitcoin’s mining difficulty, which adjusts to variable hash rate every 2016 bitcoin blocks, or approximately every two weeks, last adjusted downward by 0.49% on February 12.
Hash price, which is miner revenue per terahash — one of our favorite tools to evaluate the status of the mining cycle — has rebounded nearly 50% off its cycle lows, With network hash rate pushing to new highs, the next difficulty adjustment is projected to be +12.0%, likely occurring on February 25.
Source: https://www.bitrawr.com/difficulty-estimator
The expected ratchet upward in mining difficulty will take away some of the relief that operations were feeling in recent weeks, due to the increase in USD-denominated revenue. Miner revenue denominated in bitcoin terms will once again head to new lows.
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