BTC mining semi-annual report: miners, capital markets and AI revolution after halving

Source: Simrit Dhinsa, Simrit Dhinsa, Samuel Kiernan, Gabe Parker, Zack Pokorny, Galaxy; Compiled by: 0xjs@黄金财经

Introduction

The first half of 2024 is a critical period for the Bitcoin mining industry, with major changes in the economic situation and evolving market dynamics. Miners have experienced a roller coaster of economic changes, performing strongly at the beginning of the year until the fourth Bitcoin halving event, followed by a drop in hash price to an all-time low. Despite these fluctuations, large miners have remained steadfast in their growth trajectory, and the post-halving economic downturn has stimulated a series of M&A activities in the field as miners seek to consolidate and benefit from scale.

In addition, the convergence of AI and high-performance computing (HPC) trends with Bitcoin mining provides miners with the opportunity to allocate capacity to meet the emerging and continued exponential demand curve in AI/HPC. As the report title suggests, the value of a gigawatt has grown dramatically as competition for land and power intensifies among bitcoin miners, hyperscalers, and others. Those with near-term pathways to energy will be uniquely positioned to capitalize on both industry trends.

In this report, we dive into the changing landscape of bitcoin mining, beginning with an overview of the current state of mining economics before expanding into key post-halving themes such as the changing capital markets landscape, the massive demand for power capacity, increased M&A activity, and projected H2 H1 H2 ... As of this writing, the difficulty is 82.0 T (implied hashrate 587 EH).

Market Status

Mining Economics in the First Half of 2024

The first half of 2024 can be described as a tale of two quarters. Miners enjoyed their best economics in the past two years in the first quarter of 2024. Driven by the rise in Bitcoin prices, the hash price averaged $0.094/TH in the quarter. Hashrate continued to climb steadily in the quarter to offset some of the rise in Bitcoin prices. Strong profitability in the first quarter of 2024 is necessary to build cash balances before Bitcoin's fourth halving in the second quarter of 2024.

Mining economics remained strong in the second quarter before Bitcoin's fourth halving. During the halving, the much-anticipated launch of Runes triggered a storm of transaction fees for a few days. In the week following the halving, miners generated significant transaction fee revenue, which we will explore further in the next section. The transaction fee surge pushed the hash price up to $0.17/TH in a very short period of time, reversing the impact of the block subsidy reduction. Recall that the hash price is the preferred metric for miners to extract the total revenue per TH of computing power per day. However, this surge was short-lived, and then the hash price hit a new all-time low after the transaction fees stabilized. Since the halving, the hash price has averaged $0.054/TH.

Mining difficulty fell 10% from a peak of 88.1 T (implied hashrate 630 EH) to a post-halving low of 79.5 T (implied hashrate 569 EH) in early July as hashrate hit a new all-time low. As of this writing, the difficulty is 82.0 T (implied hashrate 587 EH).

At current hash price levels, a significant portion of miners in the network are still profitable, but the margin of profitability is small. Some miners who are on the sidelines may continue to operate because they can generate positive gross profits. However, when operating expenses and additional cash costs are taken into account, many miners find themselves unprofitable and slowly running out of cash. Strong economic conditions in the first quarter of 2024 helped build cash balances, which extended the survival of inefficient miners. Without a significant increase in Bitcoin prices or transaction fees, we expect that some miners will exit the network if the hash price falls further.

Even if this happens, downward pressure on network hashrate due to unprofitable miners shutting down machines will be offset by the addition of a new generation of application-specific integrated circuits (ASICs). The nominal hashrate of the new generation of machines is more than double that of previous generations. Seven of the top ten public miners by market cap are expected to add another 109 EH in the second half of 2024. As we analyze at the end of the report, we believe hashrate will rise significantly in the second half of 2024 despite the recent halving. This will create headwinds for miners if Bitcoin prices do not rise.

Transaction Fee Fluctuations

Since January 1, 2024, Bitcoin has facilitated more than 99 million on-chain transactions. Of these 99 million transactions, 50% are standard transactions, which we define as financial transactions. Runes, BRC-20, and Ordinal transactions account for 35%, 11%, and 4% of transactions, respectively. The 35% market share of Rune-related transactions in total transaction volume is significant considering the launch of the fungible token protocol on April 19, 2024. Since its launch, Runes have accounted for an average of 63% of all Bitcoin transactions. From January 1, 2024 to July 23, 2024, Bitcoin miners generated 12.97k BTC ($863 million as of July 23, 2024) in transaction fees. Miners earned approximately 55% of the total fees in 2023 (23.4k BTC). Bitcoin’s fourth halving occurred on April 19, 2024, making 2024 a landmark year. On the day of the halving, daily fees paid to miners surged to an all-time high of over 1,200 BTC. This surge was largely due to the launch of Runes, a new UTXO-based fungible token protocol that debuted on the halving block. On this block, the Rune token XXXXFHUXXXXXX paid $23 million in fees to become the first Rune set included in the halving block (block 840,000). Notably, 2,411 BTC (19%) of fees generated year-to-date came from the halving day and the three days that followed.

Since January 1, 2024, 67% of miner fee revenue has come from standard financial transactions, while 19% has come from Runes. BRC-20 and Ordinals transactions together account for 14% of Bitcoin fees year-to-date. "Overpayment" refers to the fee amount (in sats/vByte) of a transaction in a block that is higher than the median sats/vByte in the same block. We choose the median sats/vByte level because we believe that if you are a high time preference user, bidding around this level will give you a reasonable chance of being included in the next block. Transactions that intentionally set higher sat/vByte rates are usually time sensitive. Transaction fees spiked significantly during the fourth Bitcoin halving on April 20, 2024 (UTC). The daily median fee rate reached 590 sats/vByte, and within an hour of the halving block, the average median block fee rate surged to 1,840 sats/vByte. Rune-related transactions paid 250 sats/vByte above the median sats/vByte level for the day (42% above the median sats/vByte) to be included in the halving block and several blocks after. During the same period, Standard Finance transactions paid 200 sats/vByte above the median sat/vByte (34% above the median sat/vByte). Since the halving, Standard Finance transactions have paid 51 more days than Rune transactions in fees, while Rune transactions have paid 18 more days than Standard Finance transactions in fees.

Overlaying the daily number of Rune transactions with the above graph, we find that surges in Rune transactions are positively correlated with surges in financial transaction overpayments. Time-sensitive financial transactions are forced to compete with Rune transactions for block inclusion. While there are days when Rune transactions surge and Rune transactions overpay for block inclusion, these are considered outliers associated with specific Rune token mints.

Analyzing the data block by block shows that the frequency of standard financial transactions and Runes transactions differs within a 10-minute interval. Since the halving block (block 840,000), financial transactions have averaged 2.4 MB per block, while Runes transactions have consistently occupied about 1.5 MB of block space. Although Runes is a more efficient fungible token standard than BRC-20 (average 0.06 MB per block), the dominance of Runes over BRC-20 in block space highlights the market preference for the Rune token standard. In the halving block, Runes transactions consumed 2.7 MB, accounting for about 68% of the total space in block 840,000.

Growth/Infrastructure

The Changing Capital Market Landscape

In the first half of 2024, miners raised unprecedented funds. Since the fourth quarter of 2023, when valuations began to soar in anticipation of the approval of a spot Bitcoin ETF, miners continued to raise funds (mainly equity) to rapidly scale up until the halving. In the first quarter of 2024, listed mining companies raised a total of $1.8 billion, the highest amount raised in a single quarter in the past 3 years.

Before the halving, miners actively raised funds to support rapid growth, hold Bitcoin, improve mining machine efficiency, and build cash buffers to take advantage of opportunities in difficult times. Of the $1.8 billion raised, 75% came from the top three miners by market capitalization: Marathon, CleanSpark, and Riot. The launch of a new generation of mining machines by Bitmain and MicroBT at attractive prices has further increased the urgency of miners to expand production capacity and insert mining machines as soon as possible to generate a strong return on investment ("ROI").

As shown in the chart above, debt capital has largely disappeared from the market since mid-2022. Previously, the debt financing options available to miners were primarily centered around collateralizing ASICs. The challenges with ASIC-backed financing are volatile ASIC pricing, rapid depreciation of collateral, and the absence of margin calls in many contracts. When mining conditions deteriorate, not only do machines generate less cash flow, but their value also declines, putting lenders in a precarious position as LTV rises and miners are unable to repay outstanding debt.

However, as the value of available power capacity soars, we expect lenders to re-enter the market in the second half of 2024 and 2025. The insatiable demand for power capacity by Bitcoin miners and hyperscalers (i.e., large data centers with scalable cloud infrastructure) has driven up the value of available energy capacity. From a lender’s perspective, underwriting debt for miners with access to large-scale power capacity in favorable locations can provide protection in the event of deteriorating mining economics. Additionally, during 2022 and 2023, miners are focused on strengthening their balance sheets by reducing outstanding debt and creating leaner cost structures. As a result, we believe the industry is now in a better position to take on some debt rather than relying solely on issuing equity for growth.

Power assets remain in a price discovery period. Recent asset sale prices have ranged widely, but have generally trended upward. From a mining company perspective, capitalizing on the rising value of their sites is attractive at a project level, a non-dilutive alternative, and a differentiator from peers who continue to dilute shareholders as a primary source of capital.

Focusing on generating free cash flow and creating a lean structure while combining debt with cash flow sweeps allows miners to grow in a capital-efficient manner. Expanding into AI and high-performance computing could also open the door to new sources of debt capital that are not available to pure-play miners.

Even as debt opportunities mount, the “arms race” for expansion continues, and we expect large-scale equity financing activity to continue through the second half of 2024. Valuations of public miners have risen, driven by ambitious growth targets, the prospect of future Bitcoin price increases, and the AI/HPC narrative. These rising valuations help miners reduce shareholder dilution from equity offerings. With large public miners announcing ambitious targets, expansion and funding activity does not appear to be slowing down, even as hash prices remain near historic lows.

Million-Dollar MW

Miners are riding the crest of a growth trend at the convergence of Bitcoin and AI/HPC. Miners remain thinly profitable given the non-linear correlation of operating costs with BTC prices, and remain well-positioned to benefit from a continued bull run in Bitcoin prices. Meanwhile, generative AI is one of the fastest growing technologies in history. For example, ChatGPT had 100 million users in its first two months after launch, making it the fastest growing application in history. Coupled with the fact that the power required for AI model training and inference is an order of magnitude higher than that used by traditional data centers (a single query on ChatGPT requires 10 times the power of a Google search), the AI ​​arms race has created a staggering need for reliable power at short notice.

Global data center demand is expected to grow 160% by 2030. Currently, U.S. data center demand is estimated at 21 GW and is expected to increase to 35 GW by 2030. U.S. installed power generation capacity is expected to increase by approximately 370 GW during the same period. However, as shown in the above figure, the U.S. Energy Information Administration ("EIA") expects a net reduction in dispatchable generation sources (coal, natural gas, nuclear, etc.), which means that non-dispatchable intermittent generation sources (wind, solar, etc.) will largely fill the expected supply and demand gap. Therefore, if converted to terawatt hours (“TWh”), generation is expected to increase by 240 TWh, while new data center load (assuming 99.995% uptime) is expected to increase by 123 TWh (14 GW/1000 * 8,760 hours/year * 99.995%). The increase in intermittent generation sources, combined with growing demand from inflexible data center loads, could lead to grid congestion, transmission constraints, and supply shortages as load from other industries (such as electric vehicles and domestic industrial manufacturing) is expected to grow. This could lead to further delays in load interconnection studies, approved ramp plans, and facility agreements as grid operators assess the rapidly growing electricity demand in the United States relative to generation growth. Mark Zuckerberg noted in a recent interview with the Dwarkesh Podcast that gigawatt data centers do not exist yet and “the key now is to secure energy,” which is the biggest bottleneck in the AI ​​supercomputer-driven race. The race for power capacity is on, and Bitcoin miners with large-scale power, continuous land, water, and fiber connections are best positioned to take advantage of this megatrend.

While there are many differences between Bitcoin mining and AI data centers, miners are most likely to enter the AI/HPCC data center market from a time-to-market perspective. Most of the core electrical infrastructure is similar to that used in traditional data centers, from high-voltage substation components to downstream medium- and low-voltage power distribution systems. Some electrical components, including main power transformers and gas circuit breakers, have very long lead times, giving miners who procure these assets a competitive advantage over new entrants who face 3-4 year procurement times.

Miners own the land and power infrastructure needed to build the next generation of the world’s largest data centers. Data center developers and hyperscalers are likely to begin bidding on these campuses to secure large-scale power quickly. This trend is just beginning, with CoreWeave’s $1 billion acquisition of Core Scientific being an obvious first mover. As the traditional data center market and colocation providers become increasingly saturated, hyperscalers will be forced to push the boundaries and move further into secondary and tertiary markets for both brownfield and greenfield developments.

Miners began to dabble in AI/HPC in 2023, but the 200 MW hosting deal struck by CoreWeave and Core Scientific in June 2024 caught the industry off guard. Before the AI ​​boom, the value of these "mega-sites" owned by large miners was purely for their Bitcoin mining potential. However, the impact of the CoreWeave deal on Core Scientific's share price proves that miners can benefit from AI advantages. The chart below shows that miners who have taken steps to adopt a hybrid mining/AI approach have benefited significantly compared to those who have remained focused on a pure mining strategy.

This advantage exists because the economics of AI/HPC contracts are good as of now. If you boil it down to a dollar/MWh ("$/MWh") figure, the latest generation of Bitcoin mining machines generate electricity for about $125/MWh (S21, with a hash price of $0.053/day/day), and fluctuates with the movement of the hash price. Assuming a power cost of $40/MWh, the gross profit per MWh is $85/MWh. By contrast, as part of the Core Scientific/CoreWeave deal, CoreWeave is willing to pay a fixed $118/MWh, plus pass-through electricity costs for 280 MW (graphics processing units (“GPUs”) + IT and mechanical cooling infrastructure) for Core Scientific to provide hosting services, even after paying for the majority of the capex investment.

If the market continues to reward miners pursuing AI/HPC opportunities, we believe the number of pure-play Bitcoin miners with large sites will decrease in the future, especially if hash prices remain low.

As of July 22, the total market capitalization of the companies in the above chart (pure-play + hybrid) was $28.2 billion. When you compare this number to the capital pouring into AI (as shown in the chart below), it’s hard to imagine that well-positioned miners won’t turn to a hybrid approach in the future. As computing demand grows, hyperscalers including Amazon, Microsoft (Stargate, Wisconsin, Sweden), Google, and others have announced plans for massive growth in AI over the next few years.

Some Bitcoin miners are already benefiting from AI. However, until miners prove they can build and operate these data centers at scale, they will continue to trade at a discount to pure data center providers.

M&A Overview

Throughout 2024, Bitcoin miners have participated in a large number of M&A transactions. As predicted in our previous report, the M&A trend has remained consistent. Miners are increasingly vertically integrating by acquiring sites to increase input control. To date, the transaction value of various transactions has exceeded US$460 million, mainly divided into site sales, reverse mergers, and company acquisitions. Record low hash prices and steep ASIC efficiency curves have forced miners to adopt a more strategic approach to achieve higher operational excellence. Some of the motivations for large-scale M&A observed in 2024 include:

• Vertical Integration: The asset-light era is fading. Previously, miners would host their entire fleet of mining machines at a fixed electricity price, sacrificing the flexibility to optimize operations for cost efficiency. With the post-halving hash price hitting a record low, this has forced miners to vertically integrate more than ever before, allowing them to manage the dismal hash price conditions and declining mining economics through economic reductions or reduced operating overhead. In 2024, over 1.1 GW of power access has changed hands, indicating that miners are gaining more control over their operations. Public miners invest approximately $404,000 per MW for power access, covering current and future needs.

• Operation Consolidation: The public mining industry has seen notable transaction types, highlighting reverse mergers, as many mining operations were previously sustained by traditional fixed-rate agreements, which are no longer economically viable, triggering widespread consolidation.

• Diversification: 2024 is the year of seeking synergies through diversification, whether it is geographic expansion into emerging markets with lower energy costs or diversifying revenue streams outside of mining. For example, Bitdeer’s acquisition of ASIC design company Desiweminer embodies this strategy, acquiring internal expertise to drive the launch of their proprietary ASICs, allowing them to have another revenue stream outside of Bitcoin mining.

Future M&A Opportunities

For miners that do not upgrade their mining machine efficiency or are unable to adjust costs after the halving, we may see an erosion of liquidity, depleting their capital reserves as they seek an exit or wait for acquirers to take advantage of their distress. If the hash price remains below $0.06/TH for a long time, we may see an increase in the number of distressed products, as was the case in late 2022. At this hash price level, there is little room for profit beyond the price of electricity, let alone considering the associated operating expenses, depreciation, and any outstanding interest. For example, at current hash price levels, some of the most popular previous generation machines, notably the Antminer S19j Pro, generate USD/MWh revenue of around $70/MWh. At an average electricity price of $60/MWh, there is little room to account for all the other associated costs when addressing a miner’s bottom line.

Despite the precarious financial position of some miners, miners with power assets could be attractive acquisition targets. The demand for power in the high-performance computing sector continues to grow. For example, hyperscalers face a shortage of power capacity relative to the demand they serve and are willing to pay a significant premium for it. Earlier this year, Amazon AWS purchased capacity for $677,000 per megawatt, significantly above the average mining transaction cost per megawatt in 2024. Asset-intensive miners act as a proxy for power acquisition as grid interconnection schedules within the United States remain tight and demand for AI remains strong. It will be interesting to note how many power connections the hyperscalers are prepared to bid for.

Access to affordable capital remains a challenge for smaller private miners. Even if debt markets reopen, debt service rates may still be insufficient. These miners may consider a reverse merger with a public company to take advantage of offerings in the market.

Evaluating Attractive Prospects

The factors that influence a company’s market value are constantly changing, providing choices when narrowing down the attractiveness of targets. Such choices primarily come from changes in the power market, the premium given to public companies based on their strategies, and access to capital. Evaluating desirable targets can sometimes look like a cat-and-mouse game, trying to understand market value and anticipate waves of demand. Here is a list of some of the characteristics that make a target attractive:

• Readily Available Capacity: Miners that not only have existing power capacity, but also a healthy, approved power pipeline with a clear path to power on may become attractive targets; “lip service” will not work. The same is true for smaller miners that cannot achieve scale, cannot upgrade their equipment, or operate on thin margins, but have valuable power assets that could be more profitable by deploying more efficient machines or turning to AI/HPC.

• Contracted Predictable Revenue: Letters of Intent (“LOIs”) and term sheets do not emphasize stability. Miners who contract revenue for a certain period of time receive a constant stream of cash. Given the speculative nature of mining economics, miners are inherently subject to fluctuations in hash price, so diversifying revenue streams is a smart move.

• Last Generation Miners: When considering ASIC price speculation, many miners with less efficient machines can sell their ASICs at a discount to some of their peers with more efficient machines. This can make the $/TH price attractive, providing a good price entry point for the ROI of these secondary machines. Some last generation miners (30 J/TH) are selling at attractive prices, whether you want to mine (at a low cost) or resell them speculatively. While this may not generate value-added in the context of achieving high multiples, it can quickly pay off while maintaining the optionality of future machine upgrades.

Essentially, some miners can become valuable targets for companies with high computational needs to quickly obtain scalable power. Especially miners that have large interconnection agreements, a pipeline of power infrastructure growth, and ample headroom. Having this trifecta can increase the dollar/MW premium a miner can command by selling such capacity. As demand for computing power continues to grow, we are excited to see how this will impact miners’ valuations and their attractiveness as investment prospects.

Hashrate Forecast

In our annual report, we estimated a range of hashrate targets of 675 EH to 725 EH for the end of 2024. We are now revising growth upwards to between 725 EH and 775 EH. To arrive at our revised estimates, we looked at a subset of publicly traded miners and their hashrate targets to see what we know is a reasonable probability of the number of miners coming online this year and extrapolating that to the rest of the network. We also analyzed historical hashrate seasonality as an additional baseline. To complete the analysis, we analyzed network breakeven points to validate the range.

First, we look at hashrate growth for publicly traded miners in the second half of 2024. In the first half of 2024, aided by soaring valuations and huge amounts of money raised in the stock market, listed miners placed large purchase orders for new generation machines. The table below summarizes the hashrate figures achieved in June, the targets for the end of 2024, and the implied hashrate growth for the second half of 2024 for selected listed miners. In total, assuming that each miner meets the stated targets, these listed miners are expected to stimulate 109 EH of incremental hashrate, which means that only 7 miners can bring about 18% of the network hashrate growth.

Next, to estimate the growth of the rest of the network, we analyzed the trend of the hashrate of this group of listed miners relative to the rest of the network. As shown below, historically this portion of listed miners has accounted for 11%-13% of the network.

An oversimplified approach is to divide 109 EH by 13% to arrive at a remarkable 838 EH growth for the rest of the network. However, this assumes that listed miners will continue to hold 11-13% of the network. The scenario table below shows what the end of year hashrate would be if we changed the share of listed miners in the year end hashrate and assumed a current network hashrate of 587 EH, a 109 EH increase in listed miners hashrate, and a current 13% share of the network hashrate by listed miners.

We estimate that the public miners’ share of the network will grow to closer to 15%-30%, with a baseline of 25%. This is because public miners have access to US capital markets and were able to raise significant amounts of capital in Q1 2024, a huge advantage over private miners. At a 25% share of hashrate at year end, this would imply a total network hashrate of 741 EH, implying that the rest of the network would add 45 EH of growth in H2 2024.

So strictly from a public miner perspective, this sets our baseline for hashrate growth at 741 EH. We expect a significant amount of additional hashrate to come online in the second half of this year, which we believe is feasible through both replacement of machines and net new capacity coming online. Recalling the analysis we performed in our last annual report, the sensitivity table below shows what the network hashrate will be under different combinations of replacement network percentages and additional GW of capacity expansion. We start with 587 EH of network hashrate, assuming that the new machines inserted have an efficiency of 17.5 J/TH and the machines replaced have an efficiency of 30 J/TH.

We assume S21 is deployed in the table above, but looking beyond 2024, the table highlights the impact on network hashrate of simply replacing older generation machines with newer generation machines. Combined with announcements from new ASIC manufacturers indicating that Bitcoin mining ASICs could reach 5 J/TH efficiency next year, this would provide another meaningful boost to network hashrate in 2025.

The next section of our analysis looks at historical hashrate trends throughout the summer and at the end of the year. As shown in the chart below, hashrate typically remains stable during the summer months of July to September. This is likely due to the increasing proportion of the network located in Texas and the Middle East, where miners have had to throttle due to high temperatures. Additionally, miners in Texas are constrained due to price volatility, avoiding the quadruple peak (4CP), and participating in demand response programs.

After the summer, network hashrate begins to surge as uptime increases, the need to throttle decreases, and miners plug in new machines. Publicly traded miners are expected to increase hashrate significantly in the second half of the year, and we expect a similar dynamic this year, with a slight increase in network hashrate during the summer, followed by a rapid acceleration at the end of the year.

Network difficulty in 2024 follows a similar growth trajectory as 2022 and 2023. The difficulty in 2024 moves in lockstep with the difficulty trend in 2022. In 2022, the difficulty increased 14% from September to the end of the year from October to the end of the year. In 2023, the difficulty increased 29% from September to the end of the year. If we apply these growth rates to the current network hashrate of 587 EH, it implies a range of 670 EH to 760 EH. While the targets we previously derived from public miners are at the high end of this range, it gives us confidence in what is feasible from an infrastructure build perspective.

The final analysis is to understand the implied hash price based on our target hashrate to understand what is economically sustainable for the network. Several variables influence this sensitivity analysis, including Bitcoin price, transaction fees, average network electricity prices, and network efficiency levels. Given the volatility of transaction fees, we assume they remain fixed at 10% of the block subsidy (0.3125 BTC) per block.

For average network electricity prices, we analyzed recent declines in hashrate to get a sense of the marginal unit of electricity prices. The halving adjusted downward by 5.62%, with hashrate falling to $0.052. Using Coinmetrics’ MINE-WATCH, the estimated average network efficiency is 33.3 J/TH, which translates to an average network electricity price of $65/MWh.

As network hashrate grows, the mix of machines will become increasingly efficient. Therefore, we assume a 20% improvement in network efficiency (fewer J/TH), bringing the efficiency to 26.6 J/TH. At these efficiency levels, the breakeven hashing cost for the network would be $0.041/TH if electricity prices remained constant at $65/MWh. While hash price quantifies revenue per TH of computing power, hash cost shows the total energy cost per TH. If we consider Bitcoin price and network hash rate, and assume transaction fees are fixed at 10% of the block subsidy, the chart below shows the average gross profit margin of the network. Assuming Bitcoin price remains in the $65,000 to $70,000 range, the network can still support a hash rate of 741 EH, further confirming that these levels are economically sustainable.

In summary, based on the growth target information we received from listed mining companies, seasonal comparisons to previous years, and economic analysis, our initial hash rate target is 741 EH. Due to uncertainty in machine deployment, we create a range of 725 EH to 775 EH around this number. We recognize that there are many factors that could cause deviations from this range. On the upside, improving mining economics and faster-than-expected machine releases and deployments could push us above 775 EH. On the downside, further deterioration in hashrate or a significant capital shift from Bitcoin mining to AI/HPC could slow growth.

Conclusion

The first half of 2024 marks a defining period for the Bitcoin mining industry, one that has seen significant economic challenges and groundbreaking developments. Despite record-low mining economics, the industry has demonstrated remarkable resilience and adaptability in the face of historically low hash prices and high electricity demand.

The convergence of AI/HPC with Bitcoin mining represents a transformative new endeavor for many companies as they seek to take advantage of the industry’s strong, uncorrelated economics.

With the growing demand from AI/HPC data centers and miners, power supply is now clearly a bottleneck. Therefore, miners with large power supplies are in a good position to come out on top, and it will be critical for these miners to maintain flexibility in the future and allocate megawatt capacity in the direction that maximizes shareholder returns.