BT Daily News: Bitcoin hash prices gradually recover in the Q1, crypto market welcome spring?
1. Market Research: Bitcoin hash prices gradually recover in the Q1, crypto market welcome spring?
Who was the best performing asset in the Q1 of 2023?Comparing to the beginning of the year, the international gold price up 11.2%, the S&P 500 index up 6.21%, the first cryptocurrency bitcoin price up 70.36%, a jump above 30,000 dollars.
Bitcoin has outperformed commodities such as the S&P 500 and gold so far this year, making it the best performing asset this year and an important haven for investors seeking refuge from the risk of bank failures. While investors are cheering, the surge in Bitcoin’s price is also good news for miners, whose mining revenues have risen more than 66% over the past three months to $1.982 billion, according to data from TheBlock.
The hash prices recover, mining companies can survive
In the past 2022, crypto mining companies faced difficulties in mining and rising electricity costs. Core Scientific, one of the world’s largest crypto mining listed company in the US, even filed for bankruptcy protection.
However, as the price of a bitcoin hash has recovered, the HashrateIndex has seen a 40% rise in the past three months from a low of $0.06034 to a high of $0.08487. The Bitcoin ASIC miner with the highest energy efficiency ratio (38J/TH) is currently quoted at $16.2 per T.
The most obvious indicator of a listed crypto miner’s turnaround is its share price. Listed miners including Marathon, CleanSpark, Hut8 and Argo have rebounded since the start of the year, rising as much as 130.3%. Moreover, after deleveraging efforts in the first quarter, most mining companies’ liquidity problems eased.
Electricity prices fell, making it more profitable for miners
In the past 2022, gas and electricity prices in Europe have repeatedly surged to record highs due to a shortage of gas supplies due to geopolitical conflicts and summer heat waves. The fallout has also spread to North America. Average industrial electricity rates in most North American states are up more than 10 percent from 2021.
Georgia, North America’s most popular state for bitcoin miners, saw the biggest price increase, with average industrial electricity prices soaring from $65 to $93 per MWH between 2021 and 2022, a 43% increase. High electricity prices have also become the final straw for some mining companies. In conclusion, in 2022, the severe imbalance between natural gas supply and demand is the main cause of the global energy crisis and the resulting increase in electricity prices.
However, U.S. wholesale electricity prices are widely expected to decline in 2023 as natural gas costs fall and cheap renewable electricity expands. Texas may have the biggest industrial decline, down 45 per cent to $42.95 per megawatt per hour, according to the Energy Information Administration. (Texas has nearly 11.22% of all Bitcoin computing power in the U.S.)
Overall, wholesale U.S. electricity prices will fall 10% to 15% this year, according to estimates by research firm Rystad Energy, and miners are finally seeing prices collapse. Low electricity prices are expected to boost miners’ earnings further.
The crypto market is hoping for spring
In the past March, the U.S. banking crisis caused by the bankruptcy of Silicon Valley banks in the macro aspect highlighted the risk-averse characteristics of decentralized crypto assets represented by bitcoin. Crypto assets such as bitcoin are expected to get more attention from traditional investors.
After entering April, Musk changed the Twitter logo to Dogecoin emoji, again detonating the FOMO sentiment of the crypto community. At the same time, there are positive events in the crypto market such as the upgrade of Ethereum Shanghai. This series of events is expected to become the driving force of market price rise.
2. Bitcoin Miner Marathon First-Quarter Earnings Beat Estimates as SEC Extends Probe
Marathon Digital Holdings (MARA), one of the largest publicly traded crypto miners in North America, reported a narrower-than forecast first-quarter loss per share as a rising bitcoin price and increased production helped lift the Florida-based company back toward profitability.The company also said it received another subpoena from the U.S. Securities and Exchange Commission (SEC), which is looking into related-party transactions, among other things, that may have violated federal securities law. The company said it is cooperating with the investigation.
Marathon posted a net loss of $0.05 per share compared with an average estimate of $0.08 according to FactSet data. The loss narrowed from the previous quarter, when it was $3.14, as well as the same period in 2022, when it was $0.12, according to a Wednesday filing. Revenue rose to $51.1 million from $28.4 million in the previous three months. The figure was little changed from the year-earlier period. Analysts had forecast revenue of $48.8 million for the quarter.
After facing construction and operational hurdles last year, including the bankruptcy of one of its hosting partners – Compute North, Marathon has increased production. The firm’s operational hashrate increased 64% quarter on quarter to 11.5 exahash/second (EH/s) , with bitcoin production hitting a record of BTC 2,195 ($80 million) in the quarter. The price of bitcoin surged more than 70% in the first quarter.
“After weathering a tumultuous 2022 that tested the resilience of our entire industry, this year is off to a strong start as we grew our hash rate, reduced our cost to mine, and improved our balance sheet during the first quarter,” Chairman and CEO Fred Thiel said in the statement.
Marathon shares fell more than 2% in pre-market Nasdaq trading on Thursday.
3. AI Needs Specialized Processors. Crypto Miners Say They Have Them
When the Ethereum blockchain moved away from using a technique for verifying transactions known as proof of work last September, crypto market demand for the specialized processors that performed these calculations disappeared virtually overnight.Companies that used and hosted GPUs, or graphics processing units, saw a key part of their once-booming business vanish against an increasingly difficult backdrop for crypto. But now mining infrastructure companies like Hive Blockchain and Hut 8 Mining are finding opportunities to repurpose their GPU-based equipment for another industry on the precipice of a possible boom: artificial intelligence.
“If you can reapply some of that investment in the GPU mining infrastructure and convert it to new cards and workloads, it makes sense,” Hut 8 Chief Executive Officer Jaime Leverton said in an interview.
GPUs — designed to accelerate graphics rendering — require constant maintenance and physical infrastructure not all users are prepared to provide. As such, Hut 8 and a few other miners have been using the chips to power high-performance computing, or HPC, services for clients across a range of industries. But inroads with the burgeoning and much-hyped AI sector — which requires huge amounts of computing power — represent the kind of transformational opportunity miners had been seeking when they originally bought the processors.
Hut 8 said its HPC business generated about $16.9 million in 2022 — representing about 11% of overall revenue — after just one year of operations, driven in part by AI clients.
Likewise, Hive Blockchain — which purchased $66 million worth of GPUs from Nvidia Corp. in early 2021 — said it aims to grow its HPC revenue tenfold to $10 million in 2024 and by as much as 20 times current levels by 2025. Currently analysts tracked by Bloomberg are forecasting about $98 million in overall revenue for the company in 2024.
Not all crypto miners are in a position to capitalize on the frenzy around AI or the glut of expensive chips on hand. According to Bitpro Consulting, which offers brokerage services for miners, between 5% and 15% of existing crypto-oriented GPUs can be repurposed for AI and adjacent applications like computer vision and generative graphic design.
Additionally, a pivot toward offering HPC services for AI will require a huge investment in additional hardware and staff, when a lot of miners have been struggling financially with the slide in cryptocurrencies. Core Scientific Inc., the largest public Bitcoin miner by computing power, went bankrupt last year, and multiple miners have warned of liquidity crunches. But it could be a chance to recoup the $15 billion Bitpro estimates miners spent on the processors.
A handful of Ether miners had snapped up the high-end chips when cheaper options were unavailable at the height of the crypto boom in 2021 and early 2022. The miners were willing to pay more for these “over-qualified” processors because of the favorable economics of soaring Ether prices, which touched a high of $4,870 in November 2021. But soon the group found themselves on the wrong side of a bet regarding not only Ether prices but how long the chips would be useful.
Ethereum successfully executed its transition to a proof-of-stake consensus, making the chips unnecessary, in September 2022, not long after Ether had touched a low of $880 following a series of unrelated blowups in the crypto industry.
Ethan Vera — chief operations officer at Luxor Technologies Corp., a Bitcoin-miner products and services company — said it could be difficult for miners to compete with major data service providers like Microsoft Azure or Amazon Web Services. Those platforms already have widely used tooling systems and support staff available to AI clients. However, miners’ experience in energy management could give them an edge, given AI is very energy intensive like crypto mining, he said.
“Miners need to find the competitive advantages they have learned in mining in order to compete in HPC,” Vera said. “For the miners that can successfully pivot part of their business to HPC, that will be quite lucrative. But certainly, it won’t be a cakewalk. Only the most proficient and tenacious miners will actually pull it off.”