The Q1-2024 Hashrate Index Report by Luxor Technology offers a comprehensive analysis of the Bitcoin mining sector's performance following the Fourth Bitcoin Halving. This report provides crucial insights into key metrics such as Bitcoin Hashrate, Hashprice, Hashrate Forwards, and Bitcoin Mining Stocks, highlighting the industry's adaptability and the challenges miners face in a 3.125 BTC block subsidy world.
Following the Fourth Halving, Bitcoin miners have been closely monitoring two critical metrics: hashprice and network hashrate.
Hashprice measures the daily revenue miners can earn from a full-pay-per-share mining pool. The halving, which reduces the Bitcoin block subsidy by half, typically causes a significant drop in hashprice. However, this change did not occur immediately. Hashprice experienced extreme volatility around the Halving event. During the Halving hour, hashprice dipped to $74/PH/Day but quickly peaked at $183/PH/Day due to a surge in transaction fees driven by Runes trading activity. This spike was short-lived, and hashprice soon plummeted to a record low of $44/PH/Day before stabilizing at $50/PH/Day. For context, the previous all-time low for hashprice was $55/PH/Day in 2022, during the FTX debacle, highlighting the tough economic conditions miners now face.
The Halving has also significantly impacted the hashrate. In Q1-2024, Bitcoin's 7-day average hashrate increased by 19% to 611 EH/s and continued to rise by another 6% in April, reaching an all-time high of 650 EH/s. However, after the Halving, the hashrate fell by 10% to 580 EH/s. With mining margins compressed and the summer season necessitating power draw curtailment from industrial-scale mining farms in places like Texas, we can expect only marginal growth in Bitcoin's hashrate this year.
Interestingly, traders in hashrate markets believe that hashprice has bottomed out, at least for now. Luxor's Hashrate Forwards—a Bitcoin mining derivative that allows participants to buy and sell hashrate at fixed future prices—are trading in contango. This means traders expect hashprice to rise in the coming months, indicating a bullish sentiment. This optimism could be driven by anticipated higher transaction fees or a decrease in mining difficulty. Additionally, potential curtailments in mining hotspots like Texas could temporarily reduce hashrate, improving hashprice and mining margins.
The ASIC market saw significant slowdowns leading up to the Halving, with notable price drops across various models despite a higher average hashprice in Q1-2024. Price premiums for the Antminer S21 compared to other models increased, reflecting a strategic shift among Bitcoin miners towards more efficient hardware to offset the decline in post-Halving revenues.
Major public Bitcoin miners increased their hashrate throughout 2023, with some taking more aggressive steps to boost their hashrates in early 2024. With the block subsidy now halved, it is crucial for miners to equip their fleets with the latest hardware to stay competitive in the hashrate arms race and reduce operating costs per unit of hashrate.
Unless there is a significant increase in Bitcoin's price or a bull run in transaction fees, 2024 will be a challenging year for Bitcoin miners. Transaction fees will play an increasingly critical role in miners' profitability.
Miners who have not yet adapted will need to innovate their operational strategies. Beyond upgrading to the latest ASIC models and securing favorable power contracts, they can use aftermarket firmware to optimize their equipment, adopt sophisticated hedging strategies, and explore alternative revenue streams or cost-cutting measures.
In the US and Canada, we anticipate consolidation driven by mergers and acquisitions as companies take advantage of lower prices for ASICs and mining facilities. As the mining sector matures, it will become more integrated with energy systems. This Halving epoch will likely accelerate this integration, pushing miners towards electricity production sources to achieve the lowest possible power costs.
