The total Bitcoin [BTC] hash-rate has fallen below COVID-19 crash levels, and this time around exit seems to be permanent for the older generation of miners. Nevertheless, there is a silver lining with the rainy season arriving in China.
The levels around 85-90 million TH/s marked the bottom in hash-rates during the bear market of 2019 when the prices fell to around $7,000. The miners continue to exit even after the recent difficulty adjustment of 6% on 19th May, pointing out the unprofitable price levels.
According to Dovey Wan, crypto analyst and investor, the capitulation could continue to push the price lower. She tweeted,
“The first drop of hashrate comes after 3/12 black Thursday, tho temporarily as price bounces back quickly in a month. Most miners can shut down for a month, but it’s like holding their breath.” she added, “the second drop comes after halving and this time will continue for a while if the price keeps ranging (last for a few more difficulty adjustments cycles)”
Electricity Cost and Revenue Ratio
According to previous estimates, the marginal break-even cost for the new gen. of miners was around $10,000. However, Wan points that it is a gross over-estimation. Assuming the cost of electricity to be around $0.04 per kWh, the marginal cost of “WhatsMiner M20s 65T is around $5,000, with its flagship M20S+ will be ~$4000 per BTC.” The cost of S17 and S17+ should be comparable as well.
Nevertheless, as stated before, the S9 systems are effectively being driven out. She introduced the cost to revenue ratio, an important metric which varies with price. For new gen, the ratio is still below 1, making them profitable. While in the future old generations find relevance during extreme bull markets, but at present capitulation is more likely. She said,
Before the halving S9’s E/R is <1, now, assuming $0.04/kwh is 1.19, so all S9 need to shut down after halving at current price
While the markets expects the exit of S9 and possibly S15 miners, a further drop in price could accelerate the selling pressures among newer models as well. The rainy season stands to improve the ratio by about 25% as the cost of electricity is decreased due to the availability of abundant hydro-power, which is bullish for the hash-rates in the short term. It could take around 6-8 weeks of times to find an equilibrium in the supply schedule of Bitcoin [BTC].
Do you think that the price can drop below the marginal break-even levels? Please share your views with us.