A Crucial Metric in The Mining Industry, and more

02/02/2024 0 Comments

1. Hashprice Explained: A Crucial Metric in The Mining Industry

Hashprice Basics: What Exactly Is It?

Hashprice is a Bitcoin mining metric that represents the miner revenue on a per terahash basis.

In other words, it is the average value — in fiat currency — of the daily rewards a miner gets per each terahash calculation (USD/TH/s per day). Those rewards include both transaction fees and new bitcoin entering circulation.

As a result, hashprice responds to two critical factors: Bitcoin’s price, and total Bitcoin hashrate, which determines the mining difficulty. Many people see hashprice as the market value of a given unit of hashrate, but this metric can also provide insights about the mining ecosystem.

For example, you can estimate the profitability of a specific mining computer by multiplying its hashrate output by hashprice. Miners can also use hashprice to analyze the variations in mining revenue and strategize accordingly.

Calculating Hashprice: Total Hashrate And Bitcoin Price

As we mentioned, hashprice is the result of the dynamic between the market price of bitcoin and the total amount of hashrate working on the network.

How exactly does this dynamic work? To answer this question, we first need to contemplate a few considerations:

  1. Miners earn in bitcoin, but pay their costs and expenses in fiat. Thus, bitcoin price is important to calculate profitability, even if miners don’t intend to sell.
  2. Bitcoin difficulty automatically adjusts every 2,016 blocks proportionally to the network’s total hashrate. The more hashrate on the network, the harder it is to mine.
  3. Higher difficulty impacts profitability, as miners have to spend more computational resources — and electricity — to find a block and earn the rewards.

Essentially, hashprice responds to these two different factors — price action and hashrate/difficulty — in two different ways:

  1. Hashprice is positively correlated with changes to bitcoin’s price and transaction fee volume. The higher the price of bitcoin and/or the transaction volume, the higher the dollar-valued rewards per TH/s.
  2. Contrarily, hashprice has a negative correlation with hashrate/mining difficulty adjustments. When difficulty rises, the value of hashrate decreases, as it earns fewer rewards due to increase in competition. On the other hand, when difficulty drops, hashrate becomes more valuable, as the same amount of hashrate can potentially earn more rewards.

However, it’s the relationship between these two factors that ultimately determines hashprice.

Closing Thoughts

Hashprice represents the dollar value of the daily mining rewards per TH/s. It can be expressed as USD/TH/s per day. The metric is a valuable tool for miners to acquire insights on the current mining landscape, strategize when to hedge and plan for possible scenarios, and calculate profitability or estimate their mining revenue.

Nevertheless, hashprice can be as volatile as bitcoin itself, as it derives from the ratio between bitcoin’s market price and the network’s total hashrate, which determines mining difficulty. The relationship between these two factors has a direct impact on mining profitability, and thus, on hashprice.

2. How Bitcoin miners are keeping BTC’s price stable

The Bitcoin [BTC] Miner Reserve metric has witnessed a notable shift, suggesting sales of the king coin. Did these sales significantly impact the reserve and the price of BTC?

Bitcoin Miner Reserve sees significant moves

CryptoQuant recently reported a substantial outflow of over 4,000 BTC, valued at around $173 million, as indicated by the Bitcoin Miner Reserve.

This outflow marked the highest observed since the 16th of May 2023. AMBCrypto’s examination of the Miner Reserve further indicated that the decline in reserves had commenced around November 2023.

As of press time, more than 1,200 BTCs had left exchanges, signifying an outflow of over 5,000 BTCs from the reserve in the last three days.

Bitcoin Miner Reserve maintains high value

AMBCrypto’s examination of the Bitcoin Miner Reserve USD showed that, despite the recent outflow, the reserve’s value remained higher than the months in the previous year.

Although there was a recent decline in this value, it still stood above $70 billion at press time. As of the latest data, the Reserve value was around $78.3 billion. Until December 2023, the highest value of the Reserve from February to November 2023 was around $67 billion.

Comparing Bitcoin’s miner flow to daily trade volume

One noticeable observation by AMBCrypto is that the market adeptly absorbed Bitcoin from the Miner Reserve.

The strength of accumulation was evident when we examined BTC’s trade volume between the 29th of January and press time. During this period, the trade volume was consistently over $20 billion. In contrast, the total volume from the Miner Reserve sale was over $173 million.

When comparing the Miner Reserve sale to the overall trade volume, it becomes apparent that there was no significant impact on the prevailing trend. As of press time, BTC’s trade volume was about $23 billion.

How BTC has trended

AMBCrypto’s analysis of Bitcoin’s daily timeframe price trend showed that it has managed to stay above the $42,000 price zone despite recent declines.

At the time of this writing, it was trading at around $42,800, reflecting a decline of less than 1%. The chart showed that on the day the Miner Reserve experienced its most substantial outflow in recent times, BTC saw an increase of over 3%, reaching a value of over $43,000.

US Energy Agency to Monitor Crypto Miners’ Electricity Use

Starting next week, selected crypto miners must detail their power consumption. This follows a January 26, 2024, directive from the Office of Management and Budget.

Why US EIA Wants to Collect Crypto Miners’ Data

EIA claims the initiative is about data gathering and a public conversation starter. Hence, the agency is opening the floor for public discourse on this pivotal issue, inviting comments on the energy consumption patterns of crypto miners.

Joe DeCarolis, the EIA Administrator, underscored the agency’s commitment to dissecting the energy footprint of crypto mining within US borders.

The shift of mining operations from China to the US has spiked energy demand in certain American regions. This has raised regulatory eyebrows, with American officials voicing concerns over the surge in energy use.

The timing of this survey coincides with the upcoming Bitcoin halving, an event that will cut mining rewards, doubling the cost of mining each Bitcoin. Miners are now racing to expand their setups. The Bitcoin hash rate and mining difficulties are at all-time highs. This halving event will test miners, pushing them to adapt or exit.