March 29, 2024

How ASIC Orders by Public Miners Will Affect Hash Price and Bitcoin Acceptance

Unlike previous cycles, large institutional capital does not enter the market asshort-term speculators, but for the purpose of long-term capital placement.

Buying and using ASICs is capital intensiveinvestments that do not have an instant payback period. It is required to purchase a large number of machines that may not arrive for several months, negotiate with large energy companies and create a physical infrastructure to host ASICs and provide conditions for data hashing on the Bitcoin network. This is not a project that can be successfully launched overnight.

Institutional capital moving into the bitcoin mining industry is evidence of institutional confidence in the successful development of the industry in a few years.

ASIC orders by public miners

Public mining companies ($ RIOT, $ MARA, $ HUT and others) will provide significant hashing power in the Bitcoin network in 2022.

These mining companies publish their ASIC orders and they are very transparent about the size of the objects they are building.

By analyzing publicly available data, it is possible to estimate how much hashing power these companies will bring to the network, and how this will affect the hashing price ($ / Tchesh).

For reference, the hash price can be calculated,dividing the miner's total daily income ($) by the hash rate (Tchesh). It is a useful metric for miners to gauge the profitability of their machines now and in the future.

Today's 14-day moving averageBitcoin hashrate is ≈ 161 exahash/sec. This means that, collectively, all miners on the Bitcoin network perform a total of 161,000,000,000,000,000,000 hashesper secondto loot the next block. 161 quintillion hashes.

On delivery of all orders made publicminers, it is estimated that by the end of 2022, an additional 56.5 exaches / sec will be added to the network from the following mining companies. This is ≈ 34.7% of the total current hash rate.

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These deployments represent a significant investment that will take 6-12 months before the data on the Bitcoin network is fully hashed.

By the IV quarter of 2022, $ RIOT plans to have 90150 ASIC Antminer (95% is the latest generation S19 series). At current prices, the S19 has a total market value of $ 1 billion. In addition, privately held Phoenix Technology Consultants have placed an order for $ 650 million with Bitmain, and they plan to place another $ 2 billion in Q3 2022.

This large influx of capital to buy ASICs and build infrastructure is a long-term commitment to the future of Bitcoin.

Hashrate

Of course, the actual overall hashrate is most likelywill continue to grow faster than at the moment, as there are many more miners than existing public miners, but it is useful to understand the hashrate that public miners bring to the network and how this in itself could affect the profitability of mining in 2022.

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Note that the gray line projectedinto the future, is the overall hash rate that would be if it included orders from only the public miners listed in the table above. The area between the dashed green lines is where the hash could potentially be, given all the potential sources of hash growth (more research will be done later).

Analysis of hashing price dynamics scenarios

Below are three different price sensitivity analysis scenarios visualizing how these new ASICs joining the network will impact the hash price ($ / Thsh).

If the bitcoin price stays at $ 58K, the hash price ($ / Ths) will drop from $ 0.33 today to $ 0.24 by the end of 2022. It would still be beneficial to almost all miners.

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Unfortunately, if bitcoin drops to $ 20kwith all this new hashing power flowing into the network, the hash price will drop to $ 0.08 by the end of 2022. This is roughly the hashing price we saw after the halving in 2020, which caused a significant surrender of the miners (miners turn off the equipment).

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Last but not least, this is a variant of the bullish scenario for bothminers and hodlers. If the price of bitcoin rose to $ 250K, the hash price would be above $ 1. With hashing prices at this level, public miners are likely to place large orders for 2023.

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Conclusion

Public miners bring significantthe amount of hashing power into the Bitcoin network in 2022, however, when looking solely at this source of new hashing power, the mining margin should remain acceptable in 2022, unless the price of Bitcoin drops to $ 20K.

This is a significant investmentinstitutional investors in mining shows that &#171;smart money&#187; are making long-term investments in Bitcoin, indicating that the industry has grown significantly since 2017 and now has an institutional presence.

 

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