Coin Metrics: Mining Data Depth Analysis for Q4 2024

Author: Matías Andrade Source: Coin Metrics Translation: Shanooba, Golden Finance

Q4 2024 Network Status Report: Special Analysis of Mining Data

Key Points

• The Bitcoin halving in 2024 has had a significant impact on miners’ profitability. Although BTC income per terahash (TH/s) mining power has dropped significantly, the recent surge in Bitcoin price to over 105,000 US dollars has partially offset this impact.

• Publicly traded Bitcoin mining company stocks show higher volatility than Bitcoin price fluctuations. Companies with stronger balance sheets and more efficient mining equipment (such as Hut8, Bitdeer, and Core Scientific) outperform their peers.

• The analysis of the distribution of Bitcoin network ASIC hardware shows a significant shift in the dominant position of mining hardware. Currently, the market is mainly dominated by the S19 series machines, reflecting the rapid pace of improvement in mining hardware efficiency and operators continuously upgrading their equipment to stay competitive.

Looking ahead, the ability of Bitcoin miners to adapt to network supply adjustments, optimize operations, and leverage technological advancements will be crucial to their long-term competitiveness and profitability.

Introduction

The global Bitcoin mining industry has developed into a complex and geographically diverse sector. Miners continue to seek the most favorable conditions to support their energy-intensive operations. In contrast to the idealized vision of a “borderless, 24/7 operating cryptocurrency network,” the reality is that Bitcoin mining activities are highly sensitive to regional energy policies, climate conditions, and even cultural preferences.

This article will delve into the changing patterns and trends in the global Bitcoin mining industry. Through a detailed analysis of Bitcoin’s hash rate and mining difficulty data, we will reveal the distribution of mining power and its evolution over time, leveraging the unique insights provided by Coin Metrics data.

Halving Review

One of the most important events in the Bitcoin ecosystem is the regular halving of block rewards, with the most recent halving occurring in April 2024. This highly anticipated event occurs approximately every four years and reduces the reward received by Bitcoin miners by half, effectively reducing the new BTC supply entering circulation.

As expected, the halving in 2024 had a significant impact on the Bitcoin mining industry. Our analysis of mining difficulty adjustments (as shown in the figure below) shows that in the months leading up to the halving, the difficulty sharply increased as miners raced to maximize their rewards before the reduction.

The reduction in block rewards directly affects the income of Bitcoin miners, as shown in the figure below. Our data shows that after halving, the mining income per terahash per second (TH/s) denominated in BTC immediately drops significantly, as miners must bear only half of the reward they used to get for successfully validating each block.

Although the income in terms of BTC has declined, the recent rise in the price of Bitcoin to over $107,000 partially offsets the impact, as shown below. The dollar income per TH/s mining power has rebounded, but it is still lower than the level before the halving, as miners face the challenge of maintaining profitability in the face of reduced block rewards.

These trends highlight the resilience and adaptability of Bitcoin miners in the face of network plan supply adjustments. As the industry continues to evolve, miners need to optimize operations, seek the most cost-effective energy sources, and leverage technological advancements to remain competitive in the ever-changing cryptocurrency mining landscape.

Listed Bitcoin Mining Company

The performance of publicly traded Bitcoin mining stocks shows a strong correlation with the price trend of Bitcoin, but with significantly higher volatility. As Bitcoin reached a new all-time high in 2024, the prices of mining companies surged, albeit with variations due to factors such as operational efficiency, debt levels, and mining capabilities.

The stock prices of major mining companies such as Marathon Digital Holdings (MARA), Riot Platforms (RIOT), and CleanSpark (CLSK) have soared by hundreds of percentage points from the low point in 2023. However, this appreciation is not uniform throughout the industry. Companies with stronger balance sheets, updated mining equipment, and higher efficiency tend to outperform their peers. Since July 2024, as shown in the chart below, Hut8, Bitdeer, and Core Scientific have seen the largest increases, rising by 68%, 78.5%, and 60.2% respectively.

There are several factors driving this price trend. Mining companies have high fixed costs in equipment and electricity, which means that the rise in bitcoin prices can bring greater profitability improvement. This also explains why the volatility of mining stocks is often larger than bitcoin itself, while the value of bitcoin has appreciated by 54.3% in the same period.

The Bitcoin halving event is affecting valuation as investors consider both the decrease in mining rewards and the historical pattern of price increases after previous halvings. Ultimately, many miners hold the Bitcoin they mine during the crypto winter, effectively leveraging the price of Bitcoin. With the rise in Bitcoin’s value, these assets appreciate significantly, enhancing their financial situation.

It is worth noting that these stocks not only face Bitcoin price fluctuations, but also unique risks. Energy costs, outdated equipment, and regulatory issues may have a significant impact on their performance. In addition, competition in the mining industry continues to intensify, and even in an environment of rising Bitcoin prices, profit margins may come under pressure, which could lead to mergers and acquisitions and consolidation in the mining industry.

ASIC Distribution

By analyzing the random number patterns in the mining blocks, we can trace the development of Bitcoin mining hardware and gain a deeper understanding of the technical progress and security features of the network. Each ASIC manufacturer adopts a different random number scanning method to create identifiable signatures, allowing researchers to determine which machines may be responsible for mining specific blocks. This method, pioneered and perfected by Coin Metrics, has become an important tool for understanding the composition of the Bitcoin mining ecosystem.

The data shows that over the past six years, there have been several major shifts in the dominant position of mining hardware. The Antminer S9, which dominated before 2019-2020, has been almost completely phased out as the network has undergone significant technological upgrade cycles. The current landscape is dominated by the S19 series machines, including XP, JPro, and the standard version, which collectively represent the majority of the network’s hash rate. This shift indicates that as operators continuously upgrade to maintain competitiveness in an increasingly industrialized mining environment, the efficiency of mining hardware is rapidly improving.

Conclusion

The halving event in 2024 reduced miner rewards by 50%, which has had a significant impact on the profitability and operations of Bitcoin miners worldwide. While the income measured in BTC per hash rate immediately decreased, the recent surge in Bitcoin prices has helped offset some of the negative effects, allowing miners to maintain a certain level of profitability. However, the industry still faces challenges in adapting to network programmatic supply adjustments.

With the continuous development of the Bitcoin ecosystem, the mining industry needs to demonstrate resilience, adaptability, and a keen eye for optimized operations to maintain a leading position.