Original author: Colin Harper, Jaran Mellerud, Balmy Investor, Hashrate Index
Original compilation: Frank, Foresight News
Hashrate Index recently released the Bitcoin mining report for the third quarter of 2023, covering hash prices, common network data (hash rate/difficulty/transaction fees), inscriptions, ASIC market, energy market, stock prices of listed Bitcoin mining companies, etc. Multidimensional data.
Hash prices are at all-time lows
Thankfully, Bitcoin hash price in USD terms (Foresight News notes, a measure of profit earned per TH/s per day) continued to rise in the third quarter of 2023, with Bitcoin reaching slightly higher levels during the quarter A one-year high of $30,000 brings its average price to $28,100 in the third quarter of 2023 ($26,350 in the first three quarters of 2023), thus more than enough to provide Bitcoin hash price in USD Support to prevent it from falling sharply due to the increase in Bitcoin mining difficulty.
However, while the Bitcoin hash price in USD was above $70/PH/day during the first half of Q3, it fell below $70/PH/day in August and has been trending ever since. All-time low (in fact at the time of writing, its just below $60/PH/day and on its way to an all-time low of $55/PH/day).
The Bitcoin hash price in USD in September was $61.71/PH/day, similar to the average price in December ($61.94/PH/day) and November 2022 ($61.90/PH/day), but at that time The price of Bitcoin only fluctuates between $16,000 and $17,000.
That said, looking at the overall picture, 2023 (at least so far) is a more advantageous year for hash prices than other years, while both monthly and annualized returns this year compare to other years since 2017. The volatility of the rate is much smaller.
The price of Bitcoin rose by 63% in the first three quarters of 2023, which was enough to offset the 59% increase in Bitcoin’s 7-day average computing power during the same period. Of course, in addition to the return to rising prices in Bitcoin, changes in Bitcoin transaction fees also Provided support to hash prices.
Looking at the timeframe included below, 2018 was the worst year to date for hash prices, followed by last year’s bear market. The best year was during the unprecedented bull run of 2017, and then in 2020 – which may surprise some readers, as that was the same year that Bitcoin’s third halving slashed block rewards from 12.5 BTC per block to 6.25 BTC.
Annualized data for each year, except 2023, which shows changes to date
Transaction fees remain relatively high but are starting to decline
In the third quarter of 2023, transaction fee revenue accounted for 2.7% of all block reward revenue, significantly lower than the 8.17% in the second quarter, but still higher than the 2.3% in the first quarter.
Although transaction fee revenue decreased in the second quarter, miners were still making money in the third quarter compared with last years data. It should be noted that transaction fee revenue in the third quarter of 2022 only accounted for 1.7% of all block reward revenue in 2022. The annual average is even lower, at 1.64%. So far in 2023, transaction fee income has accounted for 4.38% of all block reward income.
As discussed in our Q2 2023 report, the increase in transaction fee revenue in 2023 stems from the paradigm shift in the market dynamics of the Bitcoin block space towards inscriptions/ordinals, which is a major change in the Bitcoin blockchain. A new standard for creating NFTs on the currency.
As shown in the chart below, the vast majority of these transaction fees were revenue generated during the brief surge in May. In fact, miners netted 1,390.89 BTC (approximately $38.15 million) in May alone, accounting for all of Inscription fee history. 66% of fees (as of Q3 2023).
This revenue comes from the rapidly growing demand from BRC-20 token collectors and inscribers to use the Bitcoin OP_CODE function to create a series of text-based inscriptions.
The chart below further confirms that the number of Inscriptions is declining significantly, with Inscriptions’ share of transaction fees and volume so far in October reaching their lowest levels since the first quarter of this year.
On average, Inscription accounted for 45% of daily trading volume and 14% of all daily transaction fees in Q3 2023; the Q2 averages were 32% and 16%, respectively, and the Q1 average Then they are 3% and 8% respectively.
ASIC mining machine prices hit record lows
Bitcoin ASIC mining machines continued to decline in 2023, with mining machine models of all specifications hitting record lows in the third quarter as mining profits continued to decline.
As shown in the figure below, the new generation of ASIC mining machines that we classify as the first tier (devices with an efficiency of 28-31 J/TH) have gradually fallen out of the group during the year. Starting in April, they have become smaller compared to the old ones. Premiums for new and used models gradually increased, and the gap has been growing ever since.
All tiers saw a brief price increase in early 2023 as hash prices increased, and another brief price increase in Q2 in response to hash price economics from Inscription-driven transaction fee revenue sexual improvement.
When we observe the changes in the listed prices of ASIC mining machines with different efficiency levels in 2023, we will find that the first quarter is particularly unique.
Due to the rebound in hash prices, every efficiency grade except the next-generation model increased in value in the first quarter. In contrast, the next-generation model like the S 19 XP appeared to be oversold in the first quarter. , as a resurgence in hash prices makes less efficient miners more attractive.
The story in Q2 and Q3 was completely different, with sales of mining rigs accelerating, especially for older and less efficient models. The chart below illustrates that miners are starting to differentiate between Tier 1 (28-31 J/TH) and Differences between new generation ASIC mining rigs at the second level (34-38 J/TH).
Antminer S 21 model
Bitmain launched its latest ASIC mining machine model at the World Digital Mining Summit in September: Antminer S 21. This model will be available in air-cooled and water-cooled versions, and is also the first ever to achieve less than 20 J/TH Efficiently run Bitcoin ASIC miner.
Bitmain may start shipping S 21 model miners as early as December, although a January shipping date seems more reasonable. Relevant sources from Bitmain told Hashrate Index that the company plans to produce at least 50,000 units of this model of mining machines per month within 18 months, with air-cooled models and water-cooled models accounting for half, but if there is sufficient demand, they will produce 50,000 miners per month. Up to 100,000 units of this model of mining machines can be produced.
At the World Digital Mining Summit, Bitmain also announced preferential prices for bulk reservations of the S 21 model mining machine. For the first phase of reservation orders, it is required to purchase at least 1.2 EH/s (conversion: 6,000 air-cooled models, The water-cooled model is 3,380 units), while Bitmain sells it for $14/TH, which means the air-cooled model is priced at $2,800 per unit and the water-cooled model is priced at $4,690 per unit.
The predetermined order cost for the second phase is US$19.6/TH (the air-cooled model is priced at US$3,920 per unit, and the water-cooled model is US$6,566 per unit), and also requires a minimum order size of 1.2 EH/s.
It should be noted that this is the preferential price when the Antminer S 21 model is released, and the price of subsequent orders will be higher than this preferential price. In addition, sellers in the secondary market are pricing close to preferential prices, with many suppliers selling models priced between $14-15/TH.
U.S. electricity prices return to stability
This time last year, many miners operating in the United States were struggling in a dire market environment of depressed hash prices and significantly higher electricity prices. In the third quarter of 2022, average industrial electricity prices in the United States reached an all-time peak of $94 per megawatt hour (MWh), driving some of the biggest players in the mining space (namely Compute North and Core Scientific) into bankruptcy.
By October 2023, electricity prices have returned to normal. As the chart above shows, power prices in mining hubs like Texas, the southeastern United States, New York, and the Rust Belt (i.e., Ohio and Pennsylvania) have returned to manageable levels, although there are some outliers ( Georgia, for example, had higher electricity costs in July 2023).
The average U.S. industrial electricity price in the third quarter of 2023 was US$86 per megawatt hour (MWh), down 8.5% from the same period last year. Electricity prices in the United States usually peak in the third quarter, because the demand for air conditioners and other refrigeration equipment is highest in the summer. .
Bitcoin Hashrate Continues to Show Seasonal Changes
Anyone paying attention to the Bitcoin mining industry may have noticed a recurring new seasonal pattern in Bitcoin hashrate over the past three years.
From October to May of the following year, Bitcoins computing power tends to grow in an almost uncontrollable manner, but this growth tends to slow down or even fall back in the summer. The mining field once again verified this pattern in the third quarter of this year, and such seasonal changes are most likely due to U.S. miners drastically reducing their mining computing power deployment in the summer.
Bitcoin’s seven-day average hash rate increased by 56% in the first five months of this year, and then fell by 1.3% during the three summer months of June, July, and August.
A sudden 12% rally in September added to the 6% gain so far this month, culminating in a record high in mid-October.
We are relatively certain that this seasonal pattern is caused by U.S. miners scaling back their hashrate deployments during the summer, especially in areas like Texas.
The chart below shows the electricity price distribution in West Texas during the third quarter of 2023. As can be seen, the majority of hourly electricity prices are above $92 per megawatt hour, which is also the case for the S 19 j Pro model. The average revenue of machines in the third quarter, so Texas miners usually reduce the deployment of computing power during these times.
Based on this data, we can imagine that a miner located in West Texas and running a batch of S 19 j Pro model mining rigs would theoretically have 80% uptime with higher power prices than their S 19 j Pro The equipments revenue breakeven point is about 20% of the time, and the average electricity price for this miner during normal operation is $33 per megawatt hour.
U.S. and Canadian custody rates remain relatively stable
U.S. and Canadian custody rates did not change materially between the second and third quarters of 2023.
According to information obtained from Luxor Business Data and Hashbranch Data, the national average colocation fee level in the United States (for all sizes) in the third quarter of 2023 was $0.0790/kWh, compared with $0.0787/kWh in the second quarter of 2023.
The average colocation fee level in Canada was $0.0725/kWh in the third quarter of 2023, compared to $0.0722/kWh in the second quarter of 2023 (all prices in US dollars).
In the United States, the average discount for hosting large clusters (more than 200 ASIC miners) vs. small clusters (1-99 ASIC miners) in Q3 2023 was 8%, compared to 7.5% in Q2 2023; The discount for large custodial protocols relative to mid-sized custodial protocols (100-200 ASICs) was 6.6% in Q3, compared with 5.3% in Q2 2023.
Bitcoin mining company stock prices first rose and then fell back
Share prices of listed Bitcoin miners started the third quarter of 2023 strongly, riding the coattails of Bitcoins rise to $30,000. Their stock prices soared in July, but then fell sharply, erasing the third quarter. All increases for the first month of the quarter.
Price action like this is also a good reminder that, overall, Bitcoin mining stocks are still trading at high beta relative to Bitcoin price.
The market usually evaluates the stock prices of Bitcoin mining companies based on the price fluctuations of Bitcoin itself, rather than on fundamental factors such as mining efficiency, electricity prices/power trading strategies, and operational execution. So when the price of Bitcoin rises, the stock prices of Bitcoin miners rise higher and faster, and vice versa.
