Will the “Hashrate Recovery” stall out?
Chinese miners jumped ship, but how long will it take them to land somewhere?
China banned Bitcoin again today and nobody blinked. We’ve seen this a thousand times before and we know how this plays out.
The “China ban" is, however, on the heels of a real expulsion of miners from the country. Maybe there is some more teeth to the recent action from the State, but at this point China is probably pushing on a string. Western & Developing nations have taken up the banner and hopped on the Bitcoin rocket. We’ve probably reached escape velocity.
Hashrate has recovered 60% since the July low of 88 Exahash, a sharp bounce that has the 30 day moving average at 136 Eh.
However, we’re hitting capacity everywhere you look. How many more ASICs can be plugged in by EOY?
Hashrate only up 8% since 2020 halving.
Even Compass Mining, an industry-leading company, is running into capacity issues. ASIC plugin timelines are now creeping into late spring 2022. Public miners like Marathon are finally getting hooked up after significant hashrate sat idle as timelines were delayed. We’re hitting peak capacity, everything beyond this point has to be built from scratch.
Smaller miners can find a few extra kilowatts somewhere, a garage or empty warehouse. But that’s a far cry from the additional 50 Eh needed to get back to the 2021 all time high.
To put that into perspective, that’s about 2 Gigawatts of additional power & infrastructure that needs to be capitalized and built. Ballpark 10 football fields of additional warehouse space.
But the hashrate “recovery” June -> September is probably not Chinese miners plugging back in. Yes, some have managed to sneakily turn back on in mainland China, but the majority of hashrate this summer has come from existing projects that are 10 to 12 months into deployment.
It is quite possible that the majority of Chinese ASICs have not been plugged in yet.
As desperate as miners are, there is still a physical infrastructure constraint and multi-month timelines that are required before these ASICs aren’t idle.
I have more faith in the resourcefulness & agility of Chinese miners than I do the CCP banning Bitcoin, so perhaps we could actually see market incentives work some big magic before the end of the year.
Hashrate EOY prediction: 165 Eh.
Charlie Spears, Strategy
Food for thought
Nikolai Tesla described Bitcoin a century ago. Maybe Elon’s Tesla should take note.
NYDIG mining report: “Bitcoin Net Zero” widely circulating among institutions.
Miners break ground
Lancium expands in Texas.
ConocoPhillips & EOG are mining Bitcoin.