Bitcoin's hashrate plummeted after China banned mining earlier this year. In the aftermath of that policy change, Chinese miners have been scrambling to redeploy their ASICs all while miners around the world are building out their own farms as fast as possible to take advantage of mining's currently unusual profitability. This livestream discusses the timeline for hashrate's recovery with two active miners:

This conversation is a must-listen for any miners and bitcoin investors who have followed the disruptive effects of China's crackdown on mining. When and how Bitcoin's hashrate will recover is the focus of this entire conversation.

Video Recording

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Audio Version

Show Notes

Introductions (timestamp)

  • Bob Burnett: Chairman of Divvy Systems and Barefoot Mining. He has a background in electrical engineering and worked on the first laptop in 1986.
  • Austin Storms: Mining and electrical background from building Bear Box mobile miners, then joined Great American Mining to help deploy similar infrastructure.

Hashrate's current recover to around 120 EH (timestamp)

  • Bob: Yes, surprised by the magnitude that it came back.
  • The hashrate coming online isn’t the hashrate that left China.
  • Hashrate recovery is likely from ASICs ordered last year that are being deployed now
  • The ASICs unplugged due to China’s crackdown are not expected to come online until later this year due to: lack of rackspace; transportation and export costs; labor shortages
  • 4 categories of returning hash: old Chinese infrastructure that got decommissioned; Chinese miner’s ASIC orders placed and pending; existing NA and European infrastructure; planned NA and European infrastructure

Chinese miners relocating and coming back online (timestamp)

  • Many moved to Europe, Kazakhstan and Georgia
  • Some of the larger Chinese miners knew it was coming and shipped machines in containers to the USA.
  • Some Chinese miners are not shipping their ASICs out of the country due to costs.
  • Some miners have a large supply of ASICs but nowhere to plug them in. They are gradually selling inventory so that they do not flood the market and crash the price.
  • Chinese contracts, revenue and profit-sharing agreements must be settled first.
  • Lack of hardware space.
  • The older machines will come on last, by the time those machines come back on, they may not be economically profitable.
  • Most of the Chinese S9s miners may remain offline indefinitely.
  • New ASICs coming online from all regions and Chinese ASICs coming back online.

Bob’s research on hashrate recovery (timestamp)

  • Link to research.
  • An estimated 2 million ASICs in China have been taken offline.
  • Next July or November is when hashrate is expected to reach ATH.
  • Divided the world by Chinese hashrate coming back online versus the rest of the world and their plans to recover hashrate.
  • An average of 2.25 EH/s added to the network per difficulty adjustment, which accelerates as more hashrate comes online
  • Doesn’t expect to see 250 EH/s until November of 2022

What types of miners are coming online now? (timestamp)

  • Bullish on Texas and big mining builds like Whinstone.
  • Smaller mining facilities are being built too.
  • Miners might start more in house production to mitigate supply and labor shortages.

The shift from ASIC shortage to rackspace shortage (timestamp)

  • A year ago, machine supply was the main pain point. Today, shortages are elsewhere in the supply chain.
  • Labor is a main cause of delays for new mining farms thanks to unemployment subsidies and other things.
  • Infrastructure delays are also a headache: miner cables, panel and switch boards, etc.
  • Rackspace shortage is caused by a combination of the Chinese miner exodus and new NA and EU miners coming online
  • Asian miners acclimating to new environments and relationships
  • ASIC supply chain delays also due to labor shortages.

Where do Barefoot and GAM look to deploy now? (timestamp)

  • GAM no plans to expand outside of North America.
  • GAM will not operate in: Oregon, Washington State, New York State, California, Illinois, and Massachusetts.
  • Washington state and New York state have a history of rate increases.
  • Political jurisdiction and power costs are the top factors to consider when deploying miners
  • Red states coincidentally seem to be favorable to miners.
  • Off-grid boutique mining solutions are possible in less friendly jurisdictions.
  • Old infrastructure in PA is being bought up and converted into bitcoin mines.
  • El Salvador has been supportive of bitcoin mining via geothermal energy (volcano mining).
  • El Salvador solar farms can be used for Intermittent mining

The relationship between the hashrate and price (timestamp)

  • Historically, hashrate follows bitcoin price, and it always will to some degree but that relationship is weakening.
  • Currently, bitcoin price has rebounded, hashprice is soaring, and hashrate is slowly recovering.
  • The relationship has been broken for a while, hashrate will always go but it would take a 50% price drop before miners consider turning off their machines.

Hosted by Zack Voell and Will Foxley