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State of the Network’s Q4 2024 Mining Data Special

By: Matías Andrade

Key Takeaways:

• The 2024 Bitcoin halving event had a substantial impact on miner profitability, with a sharp drop in BTC-denominated revenue per terahash (TH/s) of mining power, though the recent surge in Bitcoin’s price to over $105,000 has partially offset this impact.

• The performance of publicly traded Bitcoin mining stocks has exhibited higher volatility compared to Bitcoin’s price movements, with companies possessing stronger balance sheets and more efficient mining equipment, such as Hut8, Bitdeer, and Core Scientific, outperforming their peers.

• Analysis of the ASIC distribution on the Bitcoin network reveals a significant transition in mining hardware dominance, with the current landscape being largely dominated by the S19 series machines, demonstrating the rapid pace of efficiency improvements in mining hardware as operators continuously upgrade.

• Going forward, the ability of Bitcoin miners to adapt to the network’s programmed supply adjustments, optimize operations, and leverage technological advancements will be crucial to their long-term competitiveness and profitability.

Introduction

The global bitcoin mining industry has become a complex and geographically dispersed landscape, with miners constantly seeking out the most favorable conditions to power their energy-intensive operations. Unlike the idealized vision of a borderless, 24/7 cryptocurrency network, the reality on the ground is that bitcoin mining activity is highly sensitive to factors such as regional energy policies, climatic conditions, and even cultural preferences.

In this week’s issue of State of the Network, we’ll take a deep dive into the shifting patterns and trends shaping the bitcoin mining industry around the world. Through a detailed analysis of data on bitcoin’s hash rate and mining difficulty, we’ll uncover the distribution of mining power and how it has evolved over time, taking advantage of some of the unique insights powered by Coin Metrics data.

The Halving Retrospective

One of the most significant events in the Bitcoin ecosystem is the periodic halving of the block reward, which occurred most recently on April, 2024. This highly anticipated event, which takes place approximately every four years, cuts the reward received by Bitcoin miners in half, effectively reducing the new supply of BTC entering circulation.

As expected, the 2024 halving had a significant impact on the Bitcoin mining industry. Our analysis of mining difficulty adjustments, shown in the chart below, reveals a sharp increase in the months leading up to the halving as miners raced to maximize their rewards before the cut.

Source: Coin Metrics Network Data Pro

The reduction in block rewards has directly impacted the revenue earned by Bitcoin miners, as illustrated below. Our data shows a clear drop in BTC-denominated revenue per terahash (TH/s) of mining power immediately following the halving, as miners had to contend with earning half the previous reward for each block they successfully validated.

Source: Coin Metrics Network Data Pro

While the BTC-denominated revenue declined, the recent rally in Bitcoin’s price to over $107,000 has partially offset the impact, as shown below. The USD revenue per TH/s of mining power has recovered somewhat, though it remains below the pre-halving levels, as miners face the challenge of maintaining profitability with reduced block rewards.

Source: Coin Metrics Network Data Pro

These trends highlight the resilience and adaptability required of Bitcoin miners in the face of the network’s programmed supply adjustments. As the industry continues to evolve, miners will need to optimize their operations, seek out the most cost-effective energy sources, and leverage technological advancements to remain competitive in the ever-changing landscape of cryptocurrency mining.

Public Bitcoin Mining Companies

The performance of publicly traded Bitcoin mining stocks has shown strong correlation with Bitcoin's price movements, but with notably higher volatility. As Bitcoin has reached new all-time highs in 2024, mining companies have experienced significant price appreciation, though their trajectories have varied based on factors like operational efficiency, debt levels, and mining capacity.

Key mining companies like Marathon Digital Holdings (MARA), Riot Platforms (RIOT), and CleanSpark (CLSK) have seen their stock prices surge several hundred percent from their 2023 lows. However, this appreciation hasn't been uniform across the sector. Companies with stronger balance sheets and newer, more efficient mining equipment have generally outperformed their peers. Since July 2024, as seen in the chart below, the greatest earners were Hut8, Bitdeer, and Core Scientific, appreciating 68%, 78.5% and 60.2% respectively.

Source: Coin Metrics Market Data Feed & Yahoo Finance

Several factors are driving this price action. Mining companies have high fixed costs in terms of equipment and electricity, meaning that increases in Bitcoin’s price can lead to greater improvements in profitability. This explains why mining stocks often exhibit greater volatility than Bitcoin itself, which appreciated in value by 54.3% during the same period.

The Bitcoin halving event is impacting valuations as investors price in both the reduction in mining rewards and the historical pattern of price appreciation following previous halvings. Finally, many miners held onto their mined Bitcoin during the crypto winter, essentially operating as leveraged plays on Bitcoin’s price. As Bitcoin’s value has increased, these holdings have significantly appreciated, strengthening their financial positions.

It’s important to note that these stocks face unique risks beyond Bitcoin’s price movements. Energy costs, equipment obsolescence, and regulatory concerns can significantly impact their performance. Additionally, competition in the mining space continues to intensify, potentially pressuring margins even in a rising Bitcoin price environment, which could lead to M&A activity and consolidation in the mining industry.

ASIC Distribution

Bitcoin mining hardware evolution can be tracked through analysis of nonce patterns in mined blocks, providing insight into the technological progression and security characteristics of the network. Each ASIC manufacturer implements distinct approaches to nonce scanning, creating identifiable signatures that allow researchers to determine which machines are likely responsible for mining specific blocks. This methodology, pioneered and refined by Coin Metrics, has become a crucial tool for understanding the composition of Bitcoin's mining ecosystem.

Source: Coin Metrics’ MINE-MATCH

The data reveals several significant transitions in mining hardware dominance over the past six years. Antminer S9s, which dominated until 2019-2020, have been almost entirely phased out as the network underwent a major technological upgrade cycle. The current landscape is dominated by the S19 series machines, including the XP, JPro, and standard versions, which collectively represent the majority of network hashrate. This transition demonstrates the rapid pace of efficiency improvements in mining hardware, as operators continuously upgrade to maintain competitiveness in an increasingly industrial mining landscape.

Conclusion

The impact of the 2024 halving event, which reduced miner rewards by 50%, has had a significant effect on the profitability and operations of Bitcoin miners globally. While the drop in BTC-denominated revenue per terahash of mining power was immediate, the recent surge in Bitcoin’s price has helped offset some of the negative impact, allowing miners to maintain a degree of profitability. However, the industry continues to face challenges in adapting to the network’s programmed supply adjustments.

As the Bitcoin ecosystem continues to evolve, the mining industry will need to demonstrate resilience, adaptability, and a keen eye for optimizing operations to stay ahead of the curve.

Network Data Insights

Summary Highlights

Source: Coin Metrics Network Data Pro

Over the past week, Ethena introduced USDtb, a new stablecoin backed by BlackRock’s BUIDL fund. USDe continued its ascent, with a 12% increase in market cap on Ethrereum to $5.7B. The market valuation of Aave (AAVE) and Chainlink (LINK) grew by 26% and 7% respectively, on the back of purchases from Donald Trump’s World Liberty Financial (WFLI). Transaction counts for Jito (JTO) and Raydium (RAY) on Solana increased by 73% and 31% respectively.

Coin Metrics Updates

This week’s updates from the Coin Metrics team:

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