⚡️ Read the Tea Leaves
Happy 357-days A.H. everyone.
20%, 30%, 40%. All sorts of numbers were thrown out to measure the hashrate drop from the Xinjiang incident. As Steve Barbour said, the truth is in the Tea Leaves (Difficulty Adjustment).
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Rig Price Index
New-generation equipment increased only 2% during the period while old generations increased 11% on average. Old gen hardware is incredibly hard to get through the brokers right now, there is a decrease in the volume of second-hand machines.
We are doing some analysis into new-gen vs old-gen equipment and how they react differently to BTC price changes, supply shortages etc. We will post it on our blog.
Mining revenue has decreased 3% on a USD basis since the last update, caused by a fall in Bitcoin price of 7%. On BTC basis, hashprice is up to 3% as network difficulty decreased significantly as we discuss below. Hashrate appears to be back close to highs of 167 EH+.
Xinjiang Shuts Down
- On April 10th there was a water leak at a coal-powered mining farm in Xinjiang, China. The result was an inspection and temporary shut down by the central Government. Given the rainy season in Sichuan has not yet started this resulted in mining farms in the region having to turn off.
- While there is no consensus as to how much hashrate went offline, various methods were used to estimate it. (1) Self-reported hashrate, through pool APIs, was used to measure around a 20-30% drop in hashrate. The Block used the table below. (2) 3-Day SMA based on network block times, and (3) the difficulty adjustment of -13% on Saturday. Luxor predicts it was a ~30% drop based on a mix of self-reported hashrate, blocktimes, and difficulty adjustment.
- Hashrate has since come back online and difficulty is expected to adjust upwards above what we were at previous to this event. (article).
NYDIG Acquires Arctos
- Arctos, one of the pioneers of the ASIC financing space has been acquired by NYDIG. Just over a year ago Arctos did the first sale and leaseback transaction with Blockware and since then has been financing miners across North America.
- NYDIG is the latest company to bridge the gap between financial services and mining. By tying together custody, execution, ASIC financing, and mining, companies can gain more value across the entire chain. Companies such as DCG and Galaxy Digital have also ventured into the mining space.
- The acquisition cycle continues after the last newsletter’s coverage of Whinstone and Luxxfolio. While mining valuations are high the scarcity of ASICs, good operators and infrastructure make more acquisitions this cycle likely.
Miners Leveraging Balance Sheet
- Speaking about Galaxy and financial services, they recently partnered with Hut8 to earn them some return on their Bitcoin. Hut8 will earn 4% APY on 1k BTC in addition to getting a credit facility of $20mm. Although 4% seems low for us in the crypto space, being able to hold onto their Bitcoin while increasing their stack seems like a smart play.
- Most miners on our platform have shifted towards a BTC accumulation game. Selling some for opex and capex but then holding the rest. There are some good financial solutions out there for custody, self-custody, execution, and yield that miners should be taking advantage of.
Mining Educational Content
SPACs have been seizing headlines over the past few months. We did a deep dive into their economics and a case study.
Luxor is a US-based mining company.
We run a best-price platform for SHA-256 (Bitcoin) and Equihash. We operate mining pools for Dash, Zcash, Horizen, Decred, Sia, and more.
We also run mining data website, Hashrate Index.
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