Highlights:
- After dropping out of the draft budget, the Biden administration is attempting to bring back a proposed 30% tax on the electricity used by U.S.-based Bitcoin miners. In the unlikely event this tax comes to pass, it would drive most of the US based mining industry abroad.
- Marathon Digital launched a transaction submission service called Slipstream to bypass the public memepool. While this opens up an additional revenue stream, it raises concerns about increasingly many centralized chokepoints in the Bitcoin ecosystem.
- The Bitcoin Network Hashrate and difficulty reach new all-time highs at 628 EH/s and 83.95 T, respectively.
Forecast
The valuations of some mining companies have recently shown weakness, having undergone strong end-of-year rallies in 2023. This can be attributed to the uncertainties that persist about the extent of the present bull run, the impact of the halving and the hostile stance of the current U.S. administration. We expect these hindrances to disappear toward the end of 2024.
Sentiment
The mining industry stands at a crossroads as Bitcoin’s 4th subsidy halving is just around the corner. After the recent burst of optimism around BTC’s price action, most mining businesses seem to be on safe ground for the next few months. However, this could quickly change if Bitcoin, and thus the industry more broadly, shows weakness.
Analysis
An agreement has been reached after a court challenge brought forth by the Texas Blockchain Council against the U.S. Department of Energy’s push for extensive data collection from U.S. crypto miners. In light of the recent recent price action, the DOE’s Energy Information Administration had previously justified its compulsory emergency survey by the increased energy demand Bitcoin mining could put on the national grid. In a win for the mining industry in the U.S. the department has now been forced to backtrack and delete all data that was previously collected.
Regarding financial matters, a surprisingly strong pre-halving rally for BTC has markedly improved the economic outlook for the mining industry. The movement of the hash price was choppy before our last monthly roundup. However, BTC’s recent performance catapulted it from $80 per PH per day to over $120 in March (Figure 1) before it consolidated around the $100 mark. However, with this increase in profitability, hash rate and difficulty have also accelerated their push into new all-time highs. The 7-day SMA of the hash rate hit 628 EH/s on March 12 and is thus up 93% year to date (Figure 2). The difficulty now stands at 83.95 T.
If persistent, the recent uptick in the hash price will cushion miners against the effect of the upcoming halving. The block subsidy, and thus the hash price, will be slashed in half overnight, likely on April 18. At current network conditions, halving the hash price would make the profitability of miners comparable to what it was only in October 2023 (Figure 1). It thus stands to reason that most of the hash rate will stay online, with the possible exception of older machines that were only temporarily turned back on.