After experiencing extraordinarily high profit margins due to surging transaction fees right after the halving, hashprice has plummeted to historic low levels. This puts many miners on the network in a tough position. But what consequences are we seeing in the market? Let’s take a look at the impact of the free-falling hashprice. In this week’s mining economics rundown, we will delve into the following topics:
Bitcoin Price
ETF Demand Drying Up
Network Difficulty
Transaction Fees Free Fall
Hashprice Plummets
Used ASIC Prices Drop
Breakeven Hashcosts New-Gen Machines
Network Hashrate Still Unaffected
Fun Fact: ViaBTC auctioned off the ‘Epic Sat’
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Bitcoin Price
Bitcoin has been on a downward slide over the past few weeks. Last week’s negative news headlines did not help in trying to turn the market around. The arrest of the founders of Samourai Wallet, who were charged with money laundering and operating an unlicensed money transmitting business, led to other wallets that offer privacy enhancements exiting the United States. Phoenix, a Bitcoin lightning wallet, announced the removal of their app from the app store in the US effective May 3rd.
Taking a step back, there’s no need to be as pessimistic as the current market sentiment suggests. Despite the bad news streak, Bitcoin has not broken the $60k level. The pullback after the massive run-up is still within 20%, something BTC has experienced multiple times since it rose from the bottom in November 2022. However, in order for the price to increase, we do need to see demand picking up again.
ETF Demand Drying Up
The strong demand for the spot ETF after its launch was an important driver behind the price move from $40k to $75k. However, ever since the demand for this ETF started drying up in mid-March, Bitcoin has been ranging in the mid $60k area. Ecoinometrics managed to capture this conclusion in a great chart.
Network Difficulty
The last difficulty adjustment occurred on March 24th, with a slight increase of 1.98%. This marked yet another record high difficulty level of 88.10T. The next difficulty adjustment is estimated to happen on May 8th and is currently projected to be -2%.
Transaction Fees Free Fall
Right after the halving, there was a spike in transaction fees. This was driven by the hype surrounding the Runes protocol, which was launched at block 840,000. The Runes fungible token protocol dominated transactions in the first 100 blocks of the new cycle, but inscription spending has been declining ever since. The average transaction fees dropped from $90 at the peak to less than $3. This is great news for those who want to send transactions on the base layer, but not so great for miners.
Hashprice Plummets
After the halving, there was a surge in fees that caused hashprice to skyrocket by 71%, reaching levels last observed in April 2022. However, shortly after peaking at $179/PH/Day, hashprice experienced a sharp decline. After a short dead cat bounce, it kept on freefalling. Currently, it’s at record lows of $48/PH/Day, a 73% decline from the yearly high on April 19th.
Breakeven Hashcosts New-Gen Machines
With hashprice dropping to historically low levels, not only are many old- and mid-gen ASIC miners mining at a loss, but some new-gen machines are also in the red right now. The most popular machine on the network, the Antminer S19j Pro, is breaking even at a hashcost of $0.066 per kWh. While self-miners might still be running at a profit, many of these machines at hosting facilities in North America will not be.
Used ASIC Price Drop
As a consequence new-gen machines, with an efficiency of 30+ J/TH, are falling in price. Significant price adjustments were observed at the Luxor ASIC miner marketplace for popular used ASICs. The most notable adjustment was seen in the S19j Pro, which experienced a 28% decrease in its average clearing price from $7.25/TH in March to $5.25/TH in April. The M30S+ saw a 35% drop from $5.75/TH to $3.75/TH.
As Bitcoin margins tumble, the demand for the latest generation ASIC models will increase over their predecessors. However, most miners are still sitting tight, and prices for ASIC models with sub-25 J/TH efficiency have remained virtually unchanged, suggesting that mining equipment is bottoming out. Currently, machines with an efficiency under 25 J/TH are priced at $12.21 per terahash.
Network Hashrate Still Unaffected
The network hashrate reached an all-time high of 654 EH/s on the 7-Day Moving Average (DMA), just a day before the halving event. Despite mining margins taking a hit over the last week, we haven’t seen a major drawdown in hashrate yet. Miners that are mining at a loss are likely keeping machines online to observe how the market will play out. It was only ten days ago when mining was still highly profitable. If margins remain low throughout May, we might see miners switching off or powering down less efficient equipment before the new electricity billing cycle begins in June.
Fun Fact: ViaBTC auctioned off the ‘Epic Sat’
ViaBTC auctioned off the ‘Epic Sat’ from the halving block. An Epic Sat refers to the first satoshi mined within the initial block of a halving epoch, occurring every 210,000 blocks. These Epic Sats are deemed rare and collectible, prompting ViaBTC to put this satoshi up for auction. The pool distributed 40.75 BTC to miners, allowing ViaBTC to retain all profits from the auction. The auction concluded with the Epic Sat selling for 33.3 BTC, approximately $2,134,000.
