Tag: Hut 8

Bitcoin miners ramp up investment ahead of halving, set new energy consumption record

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Bitcoin (BTC) miners are investing billions in equipment and consuming energy at unprecedented rates to maximize profits before the upcoming halving event in April.

According to Bloomberg, the resurgence in Bitcoin mining activity is primarily driven by the cryptocurrency’s recovery. The world’s largest digital asset by market cap recently broke its all-time high record after losing 64% of its value in 2022 due to industry turmoil.

This revival has been further buoyed by the introduction of spot Bitcoin exchange-traded funds (ETFs) and growing anticipation of the halving, an event occurring every four years that reduces the reward for mined blocks, thereby constricting the supply of new Bitcoins.

In response, leading mining corporations, including CleanSpark and Riot Platforms, have spearheaded the charge, collectively investing over $1 billion in advanced mining rigs, as per Bloomberg, quoting figures from an analysis by TheMinerMag.

These companies employ powerful computers to validate transaction records on the blockchain, a process that is both energy-intensive and competitive. In the past month alone, the report stated that Bitcoin mining operations drew a staggering 19.6 gigawatts of power, setting a new record for energy consumption.

Bitcoin’s energy consumption is still a widely misunderstood topic, but @coinmetrics MINE-MATCH remains the industry’s most unbiased & data-driven proxy for network power usage⚡️

There’s no question that more ASICs are coming online, pushing energy consumption up +62% YoY https://t.co/msVZDhDClH pic.twitter.com/LFcVZnSfFG

— Parker Merritt (tx/acc) (@ParkerMerritt) March 9, 2024

Despite the lucrative prospects of rising Bitcoin prices — which reached an all-time high of over $70,000 on March 8 — the upcoming halving poses significant challenges.

The anticipated reduction in mining rewards is expected to slim profit margins, potentially pushing some miners into unprofitability.

However, industry leaders remain optimistic, devising innovative strategies to sustain profitability amid these changes. The prevailing sentiment is that the most efficient miners will continue to thrive by adapting to the evolving landscape.

The sector’s exponential growth has its risks, as history has demonstrated. The last crypto bull run saw a surge in public listings and fundraising efforts by mining companies, followed by a market downturn that culminated in notable bankruptcies and liquidity crises.

The forthcoming halving event and its aftermath will undoubtedly test the resilience of Bitcoin miners, compelling them to balance scale with sustainability to avoid repeating past mistakes.

The Bitcoin mining sector’s energy consumption has been the subject of heated debate. The U.S. Energy Information Administration (EIA) recently decided to discard data gathered from its emergency Bitcoin mining survey following a court agreement with the Texas Blockchain Council.

The decision ended a temporary restraining order that had previously halted the EIA’s data collection amidst ongoing legal battles. The agency is now initiating a 60-day public feedback period before issuing a new data collection notification, demonstrating a commitment to public participation in its regulatory process.

The events followed a lawsuit in February by the Texas Blockchain Council and Riot Platforms against the EIA, accusing it of unauthorized data collection from the crypto industry in violation of the Paperwork Reduction Act, highlighting the crypto sector’s concerns over regulatory scrutiny, particularly regarding energy usage.

In a separate development, Hut 8, a prominent crypto-mining firm, also recently announced the closure of its Bitcoin mining operations in Drumheller, Alberta, due to challenges related to power outages and escalating costs.

The Drumheller site, responsible for mining approximately 1.4% of global Bitcoin and utilizing about 11% of its hash rate, paused operations with the possibility of reopening if market conditions become favorable. Despite this halt, Hut 8 plans to maintain its lease on the property, keeping options open for future revival.

Hut 8’s announcement came in the wake of the company experiencing a drop in Bitcoin production in February, mining 292 BTC, a decrease from January’s 339 BTC, with the company holding 9,110 BTC by month’s end.

This downtrend is mirrored among other leading mining operations, such as Marathon Digital, Riot Platforms, and Bitfarms, with reductions in BTC production ranging between 16% and 23% over the past month.

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Julius Mutunkei

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March 9, 2024
Marathon Digital pays Hut 8 $13.5m to run two Bitcoin mining sites

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Marathon Digital has finalized a deal with Hut 8 to take over the operational control of Bitcoin mining sites by paying a termination fee of $13.5 million.

Marathon’s control of the mining sites in Granbury, Texas, and Kearney, Neb., slated for completion by April 30, follows Marathon’s Jan. 16 acquisition of the sites for $178.6 million. Hut 8 has managed operations under a contract inherited from a previous merger, valued at $1.2 million per month.

The transition aims to enhance Marathon’s operational efficiency and cost-effectiveness in Bitcoin (BTC) mining at these locations.

“By operating the sites in Granbury and Kearney ourselves, we will be able to fully recognize the operational and economic benefits of owning these assets,” Marathon Digital CEO Fred Thiel said, expressing optimism about leveraging the company’s expertise for greater benefits.

The agreement to shift control marks a significant step for both firms in optimizing their operations and strategic positioning within the crypto mining sector. On the other side, citizens in Granbury have raised concerns about noise pollution attributed to mining activities, showing the community impact of similar operations.

Hut 8 President Asher Genoot praised the teams’ dedication at both sites and anticipated a smooth handover. Despite stepping down as the operator, the company will continue to offer managed services and self-mining activities.

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Bralon Hill

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February 2, 2024
Hut 8’s Ontario Bitcoin Mining Operation Halted Amidst Power Disputes

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Hut 8’s bitcoin mining operation in North Bay, Ontario has come to a standstill after a set of disagreements with its Canadian-based energy provider, Validus Power.

Previously, Hut 8 notified the public of problems with Validus in November 2022, as the firm reported in its Q3 operations update that it had issued a notice of default to Validus for “failing to hit certain operational milestones.” Mining at the facility site was completely halted two weeks after this, as Validus stopped supplying power to the facility while delivering its own default notice for payments that it claimed Hut 8 failed to make.

The mining company’s Q3 report also stated that “Validus has also demanded that the Company make payments for delivery of energy that are higher than those negotiated under the terms of the PPA.”

Fluctuating power costs can have a major impact on bitcoin mining operations, and favorable power purchasing agreements are an integral part of a sustainable firm. According to their most recent December update, the company is “continuing to explore alternatives to mitigate the impact of the dispute with the third-party energy supplier to the site, including through organic and inorganic growth opportunities.”

Hut 8 has indicated that it fully intends to resolve the issues and restart operations as soon as possible, whether that be through a resolution involving Validus, or, as the company indicated, a potential alternative power supplier.

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BtcCasey

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January 9, 2023
Public Bitcoin Miners Fight For Survival

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The below is an excerpt from a recent edition of Bitcoin Magazine Pro, Bitcoin Magazine’s premium markets newsletter. To be among the first to receive these insights and other on-chain bitcoin market analysis straight to your inbox, subscribe now.

Record Downward Difficulty Adjustment

The mining industry continues to take a beating as rising energy inflation, debt burdens and depressed bitcoin prices take their toll. At the end of November, we saw a 13.1% decline in hash rate from all-time highs. However, of the major hash rate declines since 2016, that’s still relatively small compared to the handful of down periods over 15% during that time.

The latest 7.32% downward difficulty adjustment is a direct response to all of that hash rate going offline. As we stand today, the hash rate is right around 250 EH/s and down 7.84% from its all-time high of approximately 273 EH/s. This is the largest downward difficulty adjustment we’ve seen since July 2021, when we saw a series of downward difficulty adjustments following the Chinese mining ban. This should bring some temporary relief to current miners, but it’s too early to say if this trend in declining hash rate has already concluded.

Mining difficulty had its largest drawdown since July 2021

The hash rate drawdown from all-time highs is less than the average bear market

Even with the latest drawdown in hash rate, we’re not seeing announcements come from major public miners. Most public miners’ hash rate is either flat or is growing over the last month.

Public bitcoin miners hash rate remains steady

From those who have provided monthly production updates so far, bitcoin holdings are largely rising from the biggest three treasuries across Riot, Marathon and Hut 8 accounting for 27,579 bitcoin. Bitfarms sold a meaningful amount from their treasury which is likely related to paying down their current debt facilities.

Bitcoin holdings are rising from the largest mining companies

In bitcoin terms, miners’ stock performance continues to fall this year when looking at year-to-date returns versus bitcoin performance. The hash price bear market is alive and well, which has been a core thesis for us when evaluating the current prospects of investing in public miners versus bitcoin. Any miner outperformance in bitcoin short-term has proven to be an opportunity in the market to reprice the equity lower.

Looking at the market caps of a proxy basket of six public bitcoin miners shows just how much value has been wiped out from 2021. After a 452% rise in value to its November 2021 peak of $19.1 billion, the market wiped out 90% of value in less than a year.

The market cap of public miners has fallen over 90% since all-time highs

While the worst of the drawdown of public miner market capitalizations and hash price (miner revenue per tera hash) has already taken place, we expect that the tough conditions can last for a sustained period of time, squeezing many market participants along the way. The recent downward difficulty adjustment brought about some relief, but it is barely sufficient for many miners who purchased the bulk of their machines in 2021, expecting $30,000 as their “worst-case scenario.”

Throw in an environment where global energy prices and interest rates have skyrocketed and many operations are facing immensely difficult circumstances — particularly hosting facilities where companies serve as intermediaries for customers looking to reap the benefits of mining bitcoin. The elephant in the room for the state of the mining industry is the reality that some of the industry’s biggest hosting facilities are either already bankrupt, teetering on the edge of bankruptcy or are completely out of deployable hash rate for idle ASICs.

We will be intently watching hash rate and the state of the mining industry going forward. Although the industry has been bludgeoned over the course of 2022, we suspect it isn’t out of the woods quite yet.

The beauty of bitcoin and capitalism is that only the strong will survive. Regardless, blocks will continue to be mined every approximately 10 minutes.

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Dylan LeClair And Sam Rule

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December 11, 2022