Miners Preparing For Next Bull Run? and more

11/08/2023 0 Comments

1. Unstoppable Bitcoin Hashrate: Miners Preparing For Next Bull Run?

Bitcoin Hashrate Rise May Suggest Miners Are Gearing Up For Next Bull Run

The “mining hashrate” is a metric that keeps track of the total amount of computing power that’s connected to the Bitcoin blockchain right now. The metric is measured in terms of “hashes per second” (H/s), where a “hash” is basically a function the BTC miners have to perform on the network.

As the cryptocurrency’s hashrate has grown quite large by now, much larger units like terahashes per second (TH/s) or exahashes per second (EH/s) are used instead these days.

The hashrate can provide as a look into the interest that the miners have in the cryptocurrency right now. When the indicator’s value goes up, it means that the blockchain appears like an attractive venue for these chain validators, so they are expanding their facilities, and/or new miners are joining in.

On the other hand, the metric decreasing can be a sign that some of the miners are no longer finding Bitcoin attractive to mine, so they are ditching the network.

As displayed in the above graph, the 7-day average Bitcoin mining hashrate has observed some sharp growth during the last few weeks and has been setting ATH after ATH.

Some of this rapid rise has naturally come after the latest rally in the cryptocurrency’s price towards the $35,000 level, but a lot of it actually came before the rally happened, when BTC was still inside its rut between August and October.

On the BTC network, the block rewards, which serve as the primary revenue stream for the miners at the moment, remain fixed in BTC value (except for during the halvings), so the USD value of these rewards dictates how much revenue these miners are currently raking in.

When the asset’s price goes up, so does the value of these rewards, and hence, the income of the miners. Because of this reason, it’s not surprising to see the hashrate rise during rallies, but the fact that the recent growth had preceded this run could suggest the miners have been pretty optimistic about BTC recently.

These chain validators may be expanding their facilities in anticipation of a bull run. So far, their bet might have worked out, as the hashrate increase they did during the recent low prices would be paying off well now that the asset has seen a considerable uplift.

2. The Green Frontier: Bitcoin Mining’s Path To Sustainability And Profitability

In the face of escalating energy expenses and mounting ecological concerns, the bitcoin mining sector is embracing a wave of innovation. This evolution is not just about survival; it’s about pioneering a path to a sustainable and profitable future. Beyond endurance in a challenging market, today’s bitcoin miners are flourishing. They’re harnessing the power of state-of-the-art cooling solutions and innovative operational tactics to ensure profitability in an environmentally conscious manner.

Innovative cooling solutions are at the heart of transforming bitcoin mining’s energy profile. Isaac Holyoak from CleanSpark describes the leap forward: “Advanced cooling technologies are pivotal for enhancing our mining efficiency while reducing our environmental impact.” By moving to colder regions and utilizing smart airflow designs, mining operations achieve significant energy savings.

Immersion cooling, a method where mining hardware is submerged in a special coolant, further diminishes the reliance on energy-intensive cooling methods. Holyoak elaborates, “By maintaining optimal temperatures through immersion, we’re seeing a surge in hash rates without a parallel increase in power consumption.” This technique not only conserves energy but also prolongs the lifespan of mining equipment, setting a new standard in mining rig efficiency.

The integration of advanced technologies such as immersion cooling into the bitcoin mining process has broader implications. Initially refined at scale by bitcoin miners, these more mature technologies are now being adopted by traditional data centers. This crossover of innovation underlines the potential for mining technologies to enhance energy efficiency across various industries.

But innovation doesn’t stop at cooling. BitcoinBTC 0.0% miners are now repurposing excess energy. The unused byproduct heat from mining is diverted for agricultural use or returned to the power grid, transforming a cost center into a revenue stream.

The strategic repositioning of mining operations to areas with cheaper energy and more renewable sources highlights the practical impact of these innovations. James Behan of Chainergy provides a stellar example with their circular economy model. By using biomethane derived from local pig slurry and maize, they power their mining operations, slashing the carbon footprint and even supplying excess energy back to the community grid.

This approach not only strengthens their bottom line but also represents a leap toward sustainability. “Our method not only adheres to circular economy ideals but also significantly diminishes the environmental impact of our activities,” remarks Behan. Choosing the right location can be good for both the environment and profits.

Partnerships are also key. Miners are joining forces with energy utilities to stabilize local power grids. Daniel Roberts of Iris Energy highlights their approach: “When the wind blows, and the sun shines – take power and mine bitcoin. But when there is a weather event, we can nearly instantly put miners to sleep and give power back to the market.” This not only maximizes the use of renewable energy but also presents miners as problem-solvers for grid stability.

Bitcoin miners are forging symbiotic relationships with energy utilities. They’re no longer mere energy consumers; they’re stabilizing partners for local power grids. By providing flexibility to the energy market, they help to balance supply and demand, often receiving incentives for their contributions.

Miners like Iris Energy are not only being paid for mining bitcoin but also for playing a key role in stabilizing the local power grid. “Our facilities are engineered to rapidly adjust operations in response to grid demands, effectively acting as a demand-side battery during extreme weather events,” states Roberts. “By leveraging sophisticated software, we can swiftly power down and contribute excess energy back to the grid when it’s needed most, ensuring we’re a profitable and responsible part of the energy ecosystem.”

CleanSpark is pioneering the fine-tuning of ASIC miners through ‘underclocking’ and ‘overclocking’ techniques, optimizing the balance between energy consumption and computational efficiency. Isaac Holyoak highlights the effectiveness of their approach, noting, “By strategically underclocking, we mine the equivalent of 1.3 bitcoin for the energy typically required to mine a single one.” This technique ensures that miners maximize their output, while adhering to sustainable energy practices.

However, the sector’s drive for efficiency is not without its challenges. Behan notes the precarious nature of subsidy schemes, which once spurred growth but now, with changing regulations, threaten stability. Yet, the industry’s resolve remains unshaken, with miners like Chainergy continuing to adapt and innovate.

Bitcoin mining is undergoing a transformative phase. It is an industry pivoting with agility, combining technological prowess with strategic ingenuity. From advanced cooling to renewable energy usage, and from grid stabilization to circular business models, bitcoin miners are not only forecasting the future; they are actively constructing it. These miners are highlighting the reality that profitability now goes hand-in-hand with sustainability.

These narratives and testimonies from the field reveal a sector that is as resilient as it is revolutionary, underpinning the next chapter in bitcoin’s ascent, where profitability aligns with ecological responsibility. As the industry navigates through economic and environmental mazes, these concrete innovations and real-world strategies guide the way toward a sustainable and profitable future in bitcoin mining.

As we uncover the success stories of these innovators, it’s evident that bitcoin mining’s future is being rewritten. It’s a narrative that’s no longer dominated by the high environmental costs but by the incredible potential for sustainable practices to drive the industry forward. Bitcoin miners have shown that with the right mix of technology, strategy, and commitment to sustainability, it is possible to not only stay afloat in challenging times but also to thrive while setting a new standard for the industry.

3. Canadian Court Backs Bitcoin Miner’s Bid for Gas-Fired Power Plants

A Canada-based digital asset mining and computing company is close to acquiring four small natural gas-fired power plants in Ontario. Hut 8 Mining Corp., headquartered in Toronto, on Nov. 3 announced the Ontario Superior Court of Justice approved the company’s bid for the facilities, and for a bitcoin mine in North Bay.

The gas-fired plants would provide power for Hut 8’s mining of cryptocurrency. The assets have been operated by Validus Power Corp., but recently moved under control of a restructuring company due to Validus’ financial problems. Hut 8’s bid is supported by Macquarie Equipment Finance, a subsidiary of Macquarie Group. Hut 8 said Macquarie will receive a 20% minority equity interest if the transaction is completed; Hut 8 would retain 80% of ownership.

“If our bid to acquire four natural gas facilities in Ontario totaling 310 MW from Validus is successful, we anticipate that the strategic addition of these assets would position Hut 8 as a vertically integrated mining operation, allow us to utilize idle infrastructure and machinery, and provide access to energy pricing certainty,” said Hut 8 CEO Jaime Leverton in a news release. “The facilities are also expected to give us the optionality to pursue revenue-generating activity including selling energy to the market, mining bitcoin, and powering high-demand HPC [high-performance computing] applications like AI [artificial intelligence], which is not only in keeping with our infrastructure-first strategy, but also affords us very compelling flexibility ahead of the halving.”

Hut 8, meanwhile, on Nov. 6 said it continues to pursue an all-stock merger with U.S. Data Mining Group, also known as US Bitcoin Corp. The new company—which would be called Hut 8 Corp.—would be a publicly traded bitcoin miner “focused on economical mining, highly diversified revenue streams, and industry-leading environmental, social, and governance (ESG) practices,” according to a Hut 8 news release.

‘Stalking Horse’ Bid

Leverton in a corporate update on Monday said, “While our mining results remained steady month over month, we made meaningful progress toward building an infrastructure-first, diversified operation that we believe will be a first in our industry. Between being granted approval to submit a stalking horse bid for approximately 310 MW of natural gas power plant assets in Ontario, including our former North Bay site, and our work to close our proposed business combination with US Bitcoin Corp., we are making headway toward creating a new Hut 8 that we believe will have vertically integrated mining operations with revenue generating optionality; diversified fiat revenue streams in high performance computing, hosting, and managed services; and a significant North American footprint, which would position us well to capture upside as we head into the next halving.”

The natural gas-fired plants include a 40-MW facility in Kapuskasing; a 110-MW unit in Kingston; a 120-MW plant in Iroquois Falls; and a 40-MW unit in North Bay. Implementation of the sale, and the investment solicitation process, is led by KSV Restructuring Inc., a Canadian advisory, restructuring, and valuations firm that currently controls the assets. The deal, if ultimately approved, is expected to close by the end of this year.

Strained Relationship

Hut 8 and Validus have had an acrimonious relationship over the past few years, prior to the current transaction. The North Bay power station site was supposed to include a new cryptomining data center for Hut 8 as part of a partnership with Validus. Ground was broken in October 2021, and the companies executed a 100-MW power purchase agreement for the facility, which was expected to be completed in the second half of 2022.

Hut 8 in November of last year charged Validus with defaulting on the agreement, citing timeline concerns and saying Validus was charging Hut 8 higher payments than were negotiated. Validus then said Hut 8 was defaulting on the deal by failing to meet the payment schedule, with Validus saying that was why the company stopped supplying power to Hut 8.

That led to Hut 8 suing Validus in January of this year. Validus in August went into interim receivership, with debts of more than $40 million owed to Macquarie Equipment Finance. Macquarie had supplied turbines and other equipment for Validus’ power generation operations.

A lease agreement between Validus and Macquarie said if Validus defaulted, the company might file for bankruptcy. That led Validus to seek more financing to remain afloat; Todd Shortt, the CEO of Validus Power, in August said he had obtained a five-year loan of $55 million from Canadian lender Dominion Lending Centres.

Allegations by former Validus workers of misappropriation of funds by company management, along with more than $100,000 in unpaid taxes, led Macquarie to state it was not confident Validus could pay back its loans or have sufficient money to fund its operations. Macquarie cited concerns about Validus meeting payroll and insurance obligations. Validus ultimately went into receivership, with KSV Restructuring taking control of Validus’ assets and operations.

That led to Hut 8 beginning the stalking horse bid process, which represents the initial bid on the assets of a bankrupt company. The process sets a low-end bidding bar so that other potential bidders can’t underbid the purchase price. If the initial bid is not approved, other potential buyers then can submit competing offers.