Bitcoin (BTC) seems to be on everyone’s mind lately, as the world recently witnessed the price of BTC take a rather unexpected bearish turn this month. On January 21, 2022, Bitcoin hit six-month lows, sinking below $40,000 for the first time in months.
While some panicked, other industry insiders pointed out that the Bitcoin network has become stronger than ever. The growth of the Bitcoin network has become apparent as the hash rate figures for BTC continue to make new highs this month. For example, on January 22, the BTC network recorded an all-time high of 26.643 billion with an average hash rate of 190.71 exhash per second (EH/s).
The hash rate will continue to grow, which is good
Samir Tabar, chief strategy officer at Bit Digital, a publicly traded Bitcoin miner, told Cointelegraph that the BTC hash rate refers to the amount of computing power that is contributed to the network at any given time. Tabar explained that when it comes to Bitcoin mining, a higher hash rate equals a good hash rate. “The more computing power that goes into maintaining a network, the more secure it is and the more transactions it can handle,” Tabar said.
As such, recent Bitcoin hash rate figures are extremely remarkable, even as the price of BTC has dropped. Peter Wall, CEO of crypto mining firm Argo Blockchain, told Cointelegraph that he was not surprised to see the BTC hash rate hit close to 200 EH/s. Wall further stated that even with events that have recently disrupted the BTC mining hash rate, such as the political turmoil in Kazakhstan, the hash rate will continue to rise each month:
“Argo Blockchain’s mining margin last year in 2021, which is our revenue minus our direct costs, was over 80%. It was a very good year for the miners. In 2020, where BTC prices were much lower, our margin was 41%. So this year I think we will still see solid margins in the space despite the recent drop in Bitcoin price and rise in hash rate.”
Darin Feinstein, co-founder and co-chairman of Core Scientific, a major publicly traded blockchain infrastructure provider, told Cointelegraph that based on previous Bitcoin mining hash rate data, the BTC network grew by 200%. % after the mass exodus of miners from China. :
“The Bitcoin network a year ago was about 143 EH/s. Following the mining ban in China, the network dropped to 63 EH/s. Today, the hash rate has grown to approximately 198 EH/s. This recent increase represents three important metrics. One, represents a hash rate increase of 130 EH on the network. Two, it represents 130 EH of new hosting infrastructure and mainly new generation hardware implementation and three, this implementation has been carried out in geographic regions that use much cleaner energy than the energy used in China.”
With this in mind, Feinstein noted that although the BTC network has reached all-time highs in terms of EH/s, due to massive improvements in mining chip technology and geographic distribution outside of China, the network is now the most efficient and sustainable than it has ever been. Feinstein added that this data is important because it shows how much energy each terahash uses, which is usually represented by a metric called joules/terahash. He noted that this ratio has decreased considerably in recent years, demonstrating a significant increase in the energy efficiency of mining.
Bitcoin mining efficiency chart. Source: Darin Feinstein
Will the infrastructure support network growth?
Michael Levitt, co-founder and CEO of Core Scientific, told Cointelegraph that he anticipates the global hash rate of BTC will continue to grow at an aggressive rate.
However, Levitt mentioned that this growth depends on the advancement of the price of Bitcoin, along with the success of the infrastructure that is currently being built. “The amount of infrastructure expected will be challenged by global supply chain issues,” he said.
Feinstein added that infrastructure is the biggest challenge when it comes to mining Bitcoin. “The bottlenecks for Bitcoin mining are land, energy, equipment, and lastly infrastructure. There is a lot of ASIC hardware to buy, power and land are also available, but miners need a place to plug power and historically that is where miners have problems,” he commented.
North America has become one of the largest Bitcoin mining hubs in the world, according to data from the Cambridge Bitcoin Electricity Consumption Index, which shows that 35% of the average monthly BTC hash rate comes from the United States, while 10% comes from Canada. Wall explained that North America has taken the lead as the world’s Bitcoin mining hub for several reasons. “This is the case because of the region’s crypto-friendly jurisdiction, its stable regulatory environment, its pro-innovation nature, and most importantly, access to the most important thing miners need: mining power. low cost, preferably renewable.
Wall explained that low energy costs in the US have been significant for miners, especially when organizations tap into the right part of the power grid. “We have seen significant growth in Texas over the last 12 months,” he said.
Cointelegraph previously reported that the Texas Bitcoin mining industry consumed around 500 to 1,000 megawatts (MW) of power during November 2021. The Texas Electric Reliability Council reportedly anticipates demand could increase as much as five-fold by 2023. and has planned an additional 3,000 megawatts. to 5,000 megawatts.
Wall explained that many miners are moving to Texas due to the fact that the state operates its own electric grid that consists of a high degree of power from sustainable generation sources, but needs more flexible demand or load:
“Miners can provide a constant load that is flexible. It’s also helpful that Texas has demand response programs, where miners will shut down and return power to the grid when demand is high. This makes the network more resilient.”
Benefits like these have led Argo Blockchain to build its next 200 MW facility in Dickens County, West Texas, right next to a 5.5 gigawatt substation. “There is a lot of congestion in that substation and they need local load to relieve it. Power from West Texas needs to travel a long way to reach major urban cities like Dallas and Houston. But if we can use that power much closer to where it’s generated, that will relieve congestion,” Wall said.
By sourcing power from a nearby substation, the Argo Blockchain is demonstrating the use of sustainable energy. According to Wall, the mining company has been carbon negative since 2020. This is important, as Tabar stated that a massive environmental, social, and governance movement is currently taking on the crypto mining industry:
“Miners must extract energy from clean sources or else they will be regulated out of business. It may not always be the cheapest energy sources. Miners will eventually suffer valuation discounts if they use dirty energy, even if that source is cheap.”
The advantages of going public
A rush of mining companies to go public is another trend that the Bitcoin mining industry is likely to witness this year. More recently, Texas-based Bitcoin mining company Rhodium announced plans to offer 7.69 million shares at $12–$14 each in an initial public offering (IPO).
Core Scientific went public on January 20 after merging with Power & Digital Infrastructure Acquisition in a SPAC transaction. Although shares of Core Scientific have since fallen, Feinstein mentioned that all publicly traded cryptocurrency companies such as Coinbase, Galaxy Digital and others provide institutional investment opportunities to the US market. “This is improving and giving credibility to the whole industry,” he commented.
Levitt added that publicly traded Bitcoin miners generate a number of benefits, including better access to capital while holding publicly traded shares that can be used to acquire and build other businesses. Additionally, Levitt added that having a public presence is helpful for conversations in and around the financial services industry. “However, the main benefit is much quicker access to capital to grow and develop our business,” said Levitt.
This post Bitcoin miners believe global hash rate will grow ‘aggressively’
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