The Coming Financialization of Hashrate Markets

Bitcoin hashrate, the computational power securing the Bitcoin network, is emerging as a unique commodity with intriguing investment potential

Bitcoin hashrate, the computational power securing the Bitcoin network, is emerging as a unique commodity with intriguing investment potential, say Sadiq Jaffer, Senior Manager, Financial Services, KPMG UK, and Kunal Bhasin, partner for Digital Assets Center of Excellence, KPMG Canada.

Bitcoin's economic design compels miners to minimize costs due to a halving stress-test every four years. Miners seek cheap energy, leading to two strategies: being in front of the meter (I.e., grid-tied) and being behind the meter (i.e., direct co-location with power generators).

The grid-tied model allows for economies of scale, as large-scale miners may obtain cheaper energy rates based on the load size they bring onto the grid, and participation in “Demand Response” and ancillary services, enabled by the interruptible nature of this type of compute.

The co-location model feeds on deadweight loss and mismatches between energy demand & supply, targeting intermittent renewables (e.g., solar & wind) and baseloads (e.g., hydro, nuclear, geothermal). Being behind the meter entails business models such vertical integration, partnerships, and joint ventures, enabling miners to engage in energy arbitrage and generating Renewable Energy Certificates (RECs).

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Hashrate as a commodity

Bitcoin hashrate, the computational power securing the Bitcoin network, is emerging as a unique commodity with intriguing investment potential. Its fungibility, divisibility, durability, and scarcity make it an attractive asset class.

Hashrate offers investment opportunities for individuals to participate in Bitcoin mining without owning hardware. In addition, derivatives allow for hedging against price fluctuations, providing risk management tools for miners and investors. The value of hashrate is tied to the demand for Bitcoin mining, influenced by Bitcoin price and mining profitability, but is susceptible to regulatory challenges. Despite these challenges, Bitcoin hashrate presents a compelling case as a novel commodity with unique investment and trading opportunities. As the Bitcoin ecosystem evolves, the role and significance of hashrate as a tradable asset are likely to grow, attracting further attention and innovation within capital markets.

Hash price vs. Hash cost

Hash price and hash cost are key metrics influencing the Bitcoin mining landscape. While often confused, they represent distinct aspects of mining profitability.

Hash price, the price per unit of hashpower, reflects the current market value of mining power. It's calculated by dividing the total daily mining revenue by the network hashrate. A higher hash price indicates greater profitability for miners.

Hash cost represents the cost of producing one unit of hashpower, encompassing expenses like electricity, hardware, and maintenance. A lower hashcost signifies a more efficient and profitable mining operation.

The difference between hash price and hash cost determines mining profitability. When hash price exceeds hash cost, miners reap profits. Conversely, when hash cost surpasses hash price, they operate at a loss. High hash price attracts more miners, increasing competition and potentially driving down hash price. Conversely, low hash price may discourage miners, leading to a decrease in network hashrate and potentially pushing hash price back up.

The availability of ASICs also has an impact on the relationship between hash price and hash cost. These mining machines and the current kW/h wholesale price of electricity drives network hashpower, which drives mining difficulty. Where ASICs aren’t readily available, hashpower becomes more valuable, and therefore the delta between hashprice and hashcost should expand, creating profitable opportunities for miners.

Understanding the relationship between hash price and hash cost is crucial for miners to make informed decisions. The delta between hash price and hash cost will also influence a miner’s ability to raise capital. Miners aim to lower hash cost for increased profitability, impacting their capital-raising ability. A smaller hash price-hash cost gap makes miners susceptible to Bitcoin price factors like energy costs and mining difficulty. Conversely, a larger gap suggests resilience. Lenders assessing loan risk will scrutinize this gap, pressuring inefficient miners seeking capital due to their preference for low-risk returns.

Sebagai contoh, Runes, cara yang dikeluarkan baru-baru ini untuk Bitcoin untuk mencipta token yang tidak boleh digunakan, meningkatkan permintaan ruang sekat Bitcoin buat sementara waktu, yang membawa kepada yuran transaksi yang lebih tinggi dan masa pengesahan yang lebih lama. Pada masa ini, niaga hadapan harga hash didagangkan dalam Contango berbanding harga semerta yang menunjukkan bahawa pasaran mempunyai kemungkinan tinggi untuk meningkatkan permintaan ruang sekatan masa hadapan.

Keadaan ini mendorong pelombong Bitcoin untuk menjual niaga hadapan harga hash, mengunci hasil masa hadapan; itu adalah keputusan yang terbukti berhemat kerana permintaan ruang sekat menjadi sejuk selepas separuh masa. Ketersediaan produk terpaut hashrate kini turut menyediakan lebih banyak titik data kewangan untuk meramalkan kesan peristiwa rangkaian terhadap permintaan ruang sekatan dan yuran transaksi.

Nota: Pandangan yang dinyatakan dalam lajur ini adalah pandangan pengarang dan tidak semestinya mencerminkan pandangan CoinDesk, Inc. atau pemilik dan ahli gabungannya.

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