Holy moly. Bitcoin is trading past $15,000 and holding its own. It’s been an extraordinary few weeks and miners have entered a golden epoch of extremely lucrative mining rewards.
These fruitful conditions were fostered by upper-line revenue and bottom-line costs both improving for Bitcoin miners. Price is trading roughly 38% higher than it was last month. Such a price rise would typically result in more miners deploying hashrate. However, this bout of price appreciation happened to coincide with the end of the rainy season in China’s Sichuan province.
Chinese miners turned off their hardware to transition from the Sichuan regions to coal-powered regions like Xinjiang and Inner Mongolia. A significant amount of hashrate came offline, causing the largest difficulty drop since ASIC hardware began dominating Bitcoin mining and significantly widening profit margins for miners.
Market Movements – Bullish Conditions As Institutions Gain Exposure
Bitcoin market conditions are as bullish as they have been since 2017. But this time, a new type of player has entered the game. Over recent months, there has been an increasing number of institutions getting exposure to Bitcoin.
MicroStrategy made it easier for others to follow suit when they became the first exchange-listed firm to buy Bitcoin as part of an asset allocation strategy. Since MicroStrategy’s $425 million purchase:
- Square have purchased $50 million worth of bitcoin
- Stone Ridge Asset Management revealed ownership of 10,000 bitcoin
- A UK exchange-listed firm – Mode Global Holdings PLC – announced that it plans to invest up to 10% of its $11.65 million cash reserves into bitcoin
On top of that, there has been a huge amount of bitcoin flowing out of exchanges recently. This tightens the market supply and makes the asset more susceptible to upside price movements.
Read more: Why Lattes Always Lose to Bitcoin?
Industry Developments – Iran, Miner Behaviour Study, MineSpot, BitRiver, and Taproot Activation
Iran is introducing a new federal law that will force licensed Bitcoin miners in the country to sell their generated bitcoin to the country’s central bank. The news originally surfaced from the state-run Iranian Students’ News Agency. Iran is in deep recession with strict US sanctions curbing oil exports. Western media has speculated that the move could be an attempt by the Iranian government to meet import expenses. Details of the new regulation are still uncertain.
Coinmetrics releases research analysing the behaviour of mining pools and miners. Karim Helmy has published a study which has a new methodology for exploring the impact of miners on the Bitcoin market. To date, most research and data analysis has considered movements from the wallets of mining pools. However, the dominant share of these outflows will simply be compensating miners connected to the pool. Karim partitions his investigation into both mining pools and miners. The study highlights how the holdings of miners have been progressively representing a lower portion of the total Bitcoin supply. Moreover, it shows how miner wallets have dominantly had net outflows in recent years as the Bitcoin mining industry has become increasingly competitive.
A new mining company has ambitions to set up a 160 MW facility in Russia’s Siberian region. The company, MineSpot, intends to set up a facility close to a dam in Eastern Siberia. Siberia has advanced hydropower infrastructure and it has been estimated that the region generates a surplus of 5 GW of energy. MineSpot will be a hosting facility for ASIC and GPU mining. It is uncertain how much of the estimated 160 MW will be filled. MineSpot CEO Adam Aushev anticipates that the facility will book 10 MW by the end of the year.
Russian hosting provider BitRiver establishes a joint venture with Russian energy company En+. The joint venture – called Bit+ – will provide datacenter hosting services. It is reported that the facility already has 10 MW of capacity. The duo eventually aims to scale to 40 MW of capacity.
Taproot Activation Uncertainty. Taproot – a Bitcoin protocol change which will enable greater privacy and smart contract capabilities on the network – has been merged into the Bitcoin codebase. The code merge enables testing of Taproot in the testing environments of the regtest chain and signet chain. However, there is still uncertainty over how the upgrade will be activated on the Bitcoin main network. Developers have been debating various activation methods since July with some new ideas for activation being proposed. This discussion may ramp up over the coming weeks and months.
This week’s HASHR8 podcast is a Bitcoin mining panel that features three professionals who have operated at the highest level in the industry. The trio discuss Bitcoin miner migration, seasonal hashrate swings, upcoming hardware releases, and 5 nm chips!
Listen here: Bitcoin Mining Panel with Kristy-Leigh Minehan, Alex Petrov, and Marshall Long