How Public Miner ASIC Orders will Affect Hash Price ($/TH) and Bitcoin Adoption
Institutions are Here to Stay
Unlike previous cycles, large institutional capital is coming into the space, not as short term speculators, but as long term deployers of capital.
Purchasing and deploying ASICs is a capital intensive investment that does not have an immediate payback period. It requires purchasing a large number of machines that may not arrive for multiple months, negotiating with large scale energy producers, and building physical infrastructure to host the ASICs and keep them hashing. It is not a project you can set up successfully overnight.
Institutional capital moving into the bitcoin mining space signifies their confidence that the industry will be thriving years from now.
Public Miner ASIC Orders
Public bitcoin mining firms ($RIOT, $MARA, $HUT, and others) are bringing on significant hash power to the Bitcoin network in 2022.
These mining firms publicly release their ASIC orders, and they are highly transparent about the size of the facilities they are building.
Compiling all of this public data, Blockware Solutions can estimate how much hash power these firms will bring onto the network, and how that will affect the hash price ($/TH).
For reference, hash price can be calculated by dividing the total daily miner revenue ($) by the hash rate (TH). This is a useful metric for miners to determine the profitability of their machines now and in the future.
As of today, the 14 day moving average of bitcoin’s hash rate is ≈ 161 EH/s. This means in aggregate, all miners on the bitcoin network are performing a total of 161,000,000,000,000,000,000 hashes PER SECOND to mine the next block. 161 Quintillion hashes.
Compiling all public mining orders, an estimated additional 56.5 EH/s will be added to the network from the following mining firms by the end of 2022. This is ≈ 34.7% of the total current hash rate.
Data sources included in footnotes
These deployments are sizable capital expenditures that will take 6-12 months before they are fully hashing.
By Q4 of 2022, $RIOT plans to have 90,150 Antminer ASICs (95% being the latest generation S19 series). At current S19 prices, this totals to a market value of ≈ $1B. Additionally, a private firm, Phoenix Technology Consultants, placed a $650M order at Bitmain, and they plan to follow up with an additional $2B order in Q3 of 2022.
This large inflow of capital to purchase ASICs and build infrastructure is a long term commitment to the future of bitcoin.
Hash Rate
Of course, the actual total hash rate will likely continue to grow faster than this, as there are many more miners than the existing public miners, but it is useful to understand the magnitude of hash rate public miners are bringing on the network, and how it alone could affect mining profitability in 2022.
Note the gray line projected into the future is what the total hash rate would be if only incorporating the public miner orders listed in the table above. The area between the dotted green lines is where total hash could potentially be if accounting for all potential sources of hash rate growth (more research will be done on this later).
Hash Price Scenario Analysis
Below are three different price sensitivity scenario analysis visualizing how these new ASICs joining the network will affect Hash Price ($/TH).
If the price of bitcoin remains at $58,000, the hash price ($/TH) would drop from $0.33 today to $0.24 at the end of 2022. This would still be profitable for almost all miners.
Unfortunately, if bitcoin fell back to $20,000 with all of this new hash power coming online, the hash price would fall down to $0.08 by the end of 2022. This is roughly the hash price we saw after the 2020 halving that caused a fair amount of miner capitulation (miners turning off machines).
Last, is the bull case scenario for both miners and HODLers. If the price of bitcoin rose to $250,000, the hash price would be sitting nicely over $1.00. With a hash price at this level. The public miners would likely be placing massive orders for 2023.
Conclusion
Public miners are bringing on a significant amount of hash power to the bitcoin network in 2022, however, solely looking at this source of new hash power, mining margins should remain comfy in 2022 as long as the price of bitcoin doesn’t fall back towards $20,000.
This significant investment of capital from institutional investors into the mining space shows smart money is making a long term committed investment into Bitcoin, a sign that the industry has grown significantly since 2017 and is now here to stay.
Public Miner ASIC Orders Data Sources: