Fried circuits on the Bitcoin miners
Fried circuits on the Bitcoin miners
rapidly rising electricity prices should be bad news for cryptocurrency scrapers, right? The Boutique Investment House Kuros Associates believes this after selling the Microstrategy and Riot Blockchain, listed in the USA, even though it is a short-term Bitcoin bull.
miner "have a big problem [with] the increasing energy costs, and that will not disappear in the foreseeable future," said Tancredi Cordero, Chief Executive at Kuros based in London. "The Smart Trade would be a put trade that expires in the third quarter.
What sounds like a logical trade can, however, prove to be a gambling, because when it comes to the production costs of crypto, we don't know a lot.
The average production costs of Bitcoin-Miner worldwide have dropped by almost a fifth in the past two weeks, JPmorgan estimates. After the total cost of the coin A Coin fell to around $ 15,000. And since the beginning of the year, the least more efficient miners seem to get out of the game.
The JPmorgan approach is to treat Bitcoin like a goods and use border costs for mining. The formula used comes from a paper from 2018, which was written by Adam Hayes from the Hebrew University of Jerusalem, whose budgets once delivered a very approximate lower limit for the market price:
© Adam Hayes
In order to get a total number, JPMorgan takes the current market price, the hash rate and the difficulty and then guides you through the Hayes method-although the broker grants that its central input, $ 0.05 per kWh of electricity costs can always be a guess. His benchmark, the digiconomist Bitcoin Electricity Consumption Index, no longer contained an estimate of hardware efficiency in mid -2020. The analysts now have to develop a number from the Cambridge Bitcoin Electricity Consumpte Index at the University of Cambridge, which estimates the daily power load of the blockchain:
to rely on an assumption for one of the most important inputs of the mining costs is clearly not ideal. However, since it is such an important variable and the electricity costs of individual miners are often based on bilateral agreements with electricity producers, there is often little incentive for private miners to disclose these costs. Arcane Research has estimated that listed miners in North America such as Core Scientific, Marathon, Riot, Hut 8 and Bitfarms have electricity costs between $ 24 and $ 40 per MWh or $ 0.04 and $ 0.04 per kWh based on the latest public disclosure. While this indicates that our assumption for the electricity costs of $ 0.05 per kWh could be a bit too high for the past few years, there can be clearly considerable fluctuations.
The basic load index indicates a annualized decline in the network consumption of 120 TWH in early June to around 93 TWh. In the meantime, Bitcoin's hash rate has hardly changed. This either indicates that the miners pull their least efficient systems out of traffic or that the cheaper operators have increased the capacity, concludes JPM:
This is reminiscent of the first half of 2018, since the decline in Bitcoin prices or even slightly under our estimate of the production costs with an increase in the average efficiency of the mining hardware and not with a decline in hash rates until the hash rates finally decreased at the end of 2018. When the Bitcoin block rewarding in May 2020 has effectively doubled, The miners reacted relatively quickly with a combination of an increase in efficiency of the mining hardware and a reduction in hash rates, which effectively implied that less efficient rigs were taken offline. The next halving event will probably take place in May 2024 and could have a similar dynamic.
It is also worth noting that the estimates of the mining costs can form the lower limit for Bitcoin, but what really matters is the mood:
According to JPMorgan, listed mining companies make up around 20 percent of all mining activities. These companies should have better access to funds and a more pronounced instinct for survival and compete with craft mining lotters as competitors-but the market has not shown much trust in its ability to move the cost curve down and survive the crypto winter.
The Core Scientific, Marathon and Riot listed at the Nasdaq have all broken down by almost 80 percent over the course of the year, and many operators have sold their reserves either to finance the operating costs or to meet debt obligations.
KUROS Associates has reduced his bet against US Bitcoin-Miner in response to recovery of the cryptom market last week together with the recent seizures of increased volatility in digital assets. Bitcoin could still double in the course of the summer before it falls to $ 1,000 by the end of the year, says Cordero, since institutional investors and hedge funds switch out of token with a smaller upper limit and switch to the larger names. "But if the implicit and realized volume of the options in this area sinks, we will probably reopen the trade."
Source: Financial Times