Research Summary
The report provides an in-depth analysis of the Bitcoin mining landscape, focusing on the impact of the Bitcoin Halving on mining margins, the diversification of mining operations, and the continuous improvements in chip efficiency. It also highlights the performance of publicly-traded mining companies and the dynamics of the ASIC market.
Key Takeaways
Bitcoin’s Hashrate and Mining Revenue
- Post-Halving Hashrate Decline: Following the Bitcoin Halving, the 30-day moving average of Bitcoin’s hashrate fell by 7% from its all-time high of 626 EH/s to 580 EH/s, indicating signs of miner capitulation.
- Q2 2024 Mining Revenue: Despite the Halving and a stagnant BTC price, Q2 2024 was a lucrative period for Bitcoin miners, ranking 5th in terms of total USD revenue earned since Jan. 2020, with miners earning $3.77B from block subsidies and transaction fees.
Impact of UTXO Consolidation on Mining Revenue
- Boost from OKX’s UTXO Consolidation: A massive UTXO consolidation by OKX, the 4th largest exchange by BTC spot volume, led to a brief surge in transaction fee revenue, with miners earning $38M in fees over a 3-day period.
Performance of Publicly-Traded Mining Companies
- Underdogs Outperforming: Core Scientific, Iris Energy, and TeraWulf, which are diversifying beyond pure-play mining, outperformed larger miners like Marathon Digital, CleanSpark, and Riot Platforms in Q2 2024.
- Impact of M&A Activity: The industry’s internal M&A activity has significantly influenced the price action of mining companies. For instance, CleanSpark’s acquisition of GRIID Infrastructure is expected to increase their power capacity by 400 MW within 2 years.
ASIC Market Dynamics
- Efficiency Improvements: Bitfarms improved its average fleet efficiency from 35 to 27 J/TH in 2024, while Iris Energy and TeraWulf also made significant efficiency gains. These improvements are forcing miners to consider whether to continue with aging ASIC hardware or upgrade their fleets.
- Decline in ASIC Prices: ASIC prices have fallen significantly, with Antminer S19 models trading as low as $2.5/TH on secondary markets in June 2024, down from as high as $100/TH during the 2021 bull run.
Actionable Insights
- Monitor the Impact of Halving on Mining: The impact of the Bitcoin Halving on mining margins and hashrate provides valuable insights into the health of the mining sector and could influence investment decisions in mining companies.
- Assess the Diversification Strategies of Mining Companies: The diversification strategies of mining companies, particularly their move into hosting contracts for power-hungry AI applications, could offer potential growth opportunities.
- Consider the Efficiency of Mining Operations: The efficiency of mining operations, particularly in terms of energy consumption, is a key factor to consider when assessing the performance and potential of mining companies.
- Track ASIC Market Trends: The dynamics of the ASIC market, including efficiency improvements and price trends, could influence investment decisions in mining hardware manufacturers and mining companies.
