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Monday Mining Metrics: Mining Profits Soar with $34,000 Bitcoin Tailwinds
Bitcoin Mining Update - 10/30/2023
Mining Profits Soar with $34,000 Bitcoin Tailwinds
Bitcoin’s surge past $34,000 has provided a significant boost to mining profitability, with hashprice eclipsing 7¢, netting a nearly 20% month-over-month increase.
With further green candles likely on the horizon, the value proposition of mining is becoming increasingly clear: acquire Bitcoin for a lower variable cost than buying on the spot market.
When everyone else is paying north of $40k, $50k, and potentially even $100k for BTC, miners will continue to arbitrage electricity and produce BTC for well beneath the market price.
2.3% Difficulty Increase
There is some talk that this jump in mining difficulty is the result of previously unprofitable miners plugging machines back in as Bitcoin hit new year-to-date highs. While this is certainly possible, difficulty was already projected to increase prior to the run-up in price.
The current mining difficulty epoch should provide more signal toward the legitimacy of this idea. However, even if weaker miners begin plugging back in, it is unlikely that the marginal increase in mining difficulty will be nearly the same as the increase in price. Older, less efficient machines will not have a major impact on the total network hashrate.
BTC Volatility Leads to ASIC Price Volatility
A critical component of Bitcoin mining is the price a miner pays for their machines. As an emergent asset class, ASIC pricing is highly dynamic and fragmented. The Blockware Marketplace provides transparency to an otherwise confusing and obfuscated market.
This is a market-based platform where buyers and sellers are free to engage in price discovery. Sellers can choose to denominate their prices in terms of USD or in BTC, which results in price volatility as the price of BTC moves up or down.
The vast majority of ASICs listed on the marketplace are priced in terms of dollars. As such, last week’s surge in the price of BTC resulted in these machines becoming much cheaper in terms of BTC. This presents a much more attractive opportunity on the buy side as it lowers the opportunity cost of buying ASICs instead of spot BTC.
S19 XPs are trading for roughly 0.124 BTC, down ~40% in BTC-denominated terms from earlier this year when they were trading north of 0.2 BTC.
If Bitcoin continues to do what many expect it to do over the next 12 months, then ASIC prices will experience a similar bull market as well; especially when denominated in USD. So not only will miners benefit from producing BTC for less than the market price, but their capital investment into ASICs, especially for those buying rigs during the bear market while they are cheap, will appreciate in value as well.
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All content is for informational purposes only. This Blockware Intelligence Newsletter is of general nature and does consider or address any individual circumstances and is not investment advice, nor should it be construed in any way as tax, accounting, legal, business, financial or regulatory advice. You should seek independent legal and financial advice, including advice as to tax consequences, before making any investment decision.