Highlights
After dropping out of the draft budget, the Biden administration is attempting to revive a proposed 30% tax on the electricity used by U.S.-based Bitcoin miners. If this tax comes into effect, it would likely drive most of the US-based mining industry abroad.
Marathon Digital’s Slipstream Service Raises Concerns
Marathon Digital has launched a transaction submission service called Slipstream to bypass the public memepool. While this opens up an additional revenue stream for Marathon Digital, it raises concerns about the increasing number of centralized chokepoints in the Bitcoin ecosystem.
Bitcoin Network Hashrate and Difficulty Reach New All-Time Highs
The Bitcoin Network Hashrate and difficulty have reached 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 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.
Impact of Proposed Tax on U.S.-Based Bitcoin Miners
If the proposed tax comes into effect, it would likely have a significant impact on the mining industry in the U.S. The 30% tax on electricity used by miners could lead to increased costs for miners, making it less profitable for them to operate in the country. This could drive many miners out of business or force them to seek more favorable regulatory environments abroad.
Marathon Digital’s Slipstream Service: A Centralized Solution?
Marathon Digital’s launch of the Slipstream service raises concerns about the increasing number of centralized chokepoints in the Bitcoin ecosystem. The service allows users to bypass the public memepool, which could lead to increased centralization and decreased security for the network.
However, Marathon Digital has stated that the Slipstream service is designed to be a temporary solution until the mining industry can transition to more decentralized solutions. The company has also emphasized that the service will not compromise the security of the Bitcoin network.
Bitcoin Network Hashrate and Difficulty: A Record-Breaking Trend
The recent surge in hash rate and difficulty has broken all previous records, with the 7-day SMA of the hash rate hitting 628 EH/s on March 12. This represents a 93% increase year to date.
The difficulty has also reached new heights, standing at 83.95 T. This trend suggests that miners are becoming increasingly profitable, which could lead to further growth in the mining industry.
Forecast: A Turning Point for the Mining Industry?
The valuations of some mining companies have recently shown weakness, having undergone strong end-of-year rallies in 2023. However, we expect these hindrances to disappear toward the end of 2024 as the market becomes more optimistic about the future of Bitcoin and the mining industry.
Sentiment: A Mixed Bag for the Mining Industry
The sentiment around the mining industry is mixed, with some investors feeling optimistic about the future of Bitcoin and others feeling pessimistic. However, most mining businesses seem to be on safe ground for the next few months, thanks to the recent surge in profitability.
However, this could quickly change if Bitcoin shows weakness or if the proposed tax comes into effect. The industry is at a crossroads, and it remains to be seen how it will navigate the challenges ahead.
Analysis: A Win for the Mining Industry
The agreement reached after the 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 has been hailed as a win for the mining industry.
The department has now been forced to backtrack and delete all data that was previously collected, which is a significant victory for the industry. This development should provide some relief for miners who were concerned about the potential impact of increased regulation on their operations.
Conclusion
The mining industry is at a critical juncture, with several challenges ahead, including the proposed tax, the upcoming halving, and the increasing number of centralized chokepoints in the Bitcoin ecosystem. However, we expect these hindrances to disappear toward the end of 2024 as the market becomes more optimistic about the future of Bitcoin and the mining industry.
The recent surge in hash rate and difficulty has broken all previous records, with the 7-day SMA of the hash rate hitting 628 EH/s on March 12. This represents a 93% increase year to date.
The difficulty has also reached new heights, standing at 83.95 T. This trend suggests that miners are becoming increasingly profitable, which could lead to further growth in the mining industry.
Overall, the future of the mining industry remains uncertain, but one thing is clear: it will be an exciting and challenging time for investors and operators alike.
