Key Takeaways

• Following a tumultuous 2022, miners got a much-needed reprieve in 2023 driven by improvements in bitcoin price, spikes in transaction fees, and the easing of energy prices. Offsetting some of these moves was the meteoric rise in hashrate, which rose 104% in 2023.
• Transaction fees were a massive dark horse in 2023. Transaction fee spikes that occurred periodically in 2023 helped drive miner revenue significantly higher. Transaction fees totalled 23,445 bitcoin in 2023, of which Ordinals transactions contributed 5,000 bitcoin. Fees in 2023 were over 4x the sum of transaction fees in 2022, which totalled 5,375 BTC.
• We expect hashprice volatility to increase in 2024 as demand for blockspace ebbs and flows, causing sharp movements in transaction fees, which will lead to further changes in hashrate.
• Over the course of the year, public miners purchased over 94 EH worth of machines valued at more than $1.53B. Miners particularly focused on acquiring new generation machines with efficiencies under 20 J/TH to update their fleet ahead of the halving.
• We estimate that roughly 15-20% of the network hashrate at the conclusion of 2023 (86-115 EH) could come offline at the time of the halving. Based on our analysis, we expected 2024 network hashrate to end in a range between 675 EH and 725 EH.
• In 2023, global mining power costs, primarily influenced by natural gas, remained remarkably stable, especially in the U.S. This contrasted with the volatility in 2022, attributed to Eastern European disturbances. The stability was driven by record-high U.S. natural gas production, surplus inventories, reduced demand due to milder temperatures, and a slight industrial consumption decline, providing miners with a stable energy cost environment leading up to the impending halving event.
• Bitcoin miners, facing revenue volatility and heightened reliance on transaction fees, are actively assessing new risk management strategies, including instruments such as hashrate derivatives contracts, to ensure revenue predictability, stability, and to maintain investor confidence.

... read more