Bitcoin Miners’ February Production Fell on Shorter Month, Winter Storm

North American crypto miners mined a lower number of bitcoins in February compared to the previous month, mainly because February is a shorter month and because some mining operations had to curtail operations due to winter weather, according to data compiled by CoinDesk. A higher hashrate and difficulty also dampened the output.

Among the top seven North American publicly traded miners, on average, bitcoin production fell about 8.6%, with Marathon Digital (MARA) lagging its peers. Meanwhile, the group of miners continued to increase their hashrate in February. According to the February data, the miners increased their hashrate by about 6% in February from the previous month, with Riot Blockchain (RIOT) adding the most among the group.

Marathon Digital said in a statement that main reasons for the decline was “network difficulty, continued fluctuations at the power station in Montana, and voluntary curtailment of our miners in Texas to support the grid during a recent storm.”

However, the miner noted that it expects monthly production to improve as the company diversifies its miners’ deployment across new locations and forecasted that it would remain on track to reach its hashrate goal of 23.3 exahash per second (EH/s) by early 2023.

Fewer days to mine

One of the main reasons for the lower bitcoin production in the U.S. was that there are fewer days in the month of February. For example, miner CleanSpark’s (CLSK) bitcoin production fell about 10% to 276. The miner said it reached a production rate as high as 10.15 BTC per day, which indicates that at such a production rate, the total would’ve been close to January production of more than 300, if there were 30 or 31 days in the month.

Another miner, Hive Blockchain (HIVE), also saw about an 8% reduction to 244 BTC in February. The miner said that it was producing an average of 8.7 BTC per day and at that rate, if the month had 30 or 31 days, it would have been able to reach production similar to January's.

“North American public mining companies mined ~2,890 new BTC in February (~11.6% share of total BTC mining network), ~9.7% less than in January,” Jefferies analyst Jonathan Petersen wrote in a March 9 research note. “The decrease in mining was due almost entirely to February having 28 days vs. 31 days,” he added.

U.S. winter storms take a toll on bitcoin mining

In February, miners were also hit by winter storms in the U.S., which saw several companies, mainly in Texas, curtailing some of their operations to help stabilize the power grid. Marathon Digital, Riot Blockchain, Rhodium, Argo Blockchain (ARBK) and other miners curtailed some of their U.S. operations to help the power grid stay online during the winter storm.

Recently, Argo and privately held Gem Mining both said the curtailing of operations to support community needs for extra power lowered their production in February, among other reasons. Meanwhile, seasonal energy curtailment programs in Quebec, Canada, also hampered the monthly bitcoin production for Canadian miner Bitfarms (BITF). “As planned, seasonal energy curtailment programs at our farms in Quebec affected production in February, but to a lesser extent than in January,” said CEO of Bitfarms, Emiliano Grodzki, in a statement.

The disruption of business by the winter storm is not new to this year for the miners. In fact, last year’s outage left about 4.5 million homes and businesses without power and led to nearly $200 billion in property damage. At that time, bitcoin miners’ operations also went offline, but it was unplanned. This year the situation was much better as miners helped stabilize the power during the storm with their planned shutdowns.

Hashrate and difficulty

The third event that hurt the miners’ production in February was the rise in the Bitcoin network’s hashrate and difficulty. “On February 1, Bitcoin’s 7-day average hashrate was 191 EH/s. By February 17, this would leap to 220 EH/s, a 15% increase,” according to a blog post by Hashrate Index, Luxor Technologies’ data platform.

This rise in hashrate resulted in about a 4.8% increase in difficulty for February, according to their data. “Bitcoin miners were hashing under an all-time high difficulty for roughly half of the month, so they were earning fewer bitcoins per unit of hashrate,” the blog post added.

Subsequently, the difficulty declined in March by about 1.5% and hashrate was around 192 EH/s, according to Hashrate Index data, which is potentially a positive development for the miners for this month.

Hashrate race and bitcoin profitability

Even though the miners earned less bitcoin in February, the race to grow hashrate by the miners hasn't subsided. In fact, they continued adding more mining rigs, as evidenced by the February data, and will continue to do so to stay competitive.

In February, Riot raised its hashrate the most out of the group, by about 15% to 3.9 EH/s, as it has deployed approximately 5,800 S19j Pro miners in its immersion-cooled building since January. The miner said it expects to have a total of 12.8 EH/s by January of 2023.

The largest miner by hashrate in North America, Core Scientific, also increased its self-mined hashrate by 9% from January and indicated that it will see its total (self-mined and hosted) hashrate rise from 40 EH/s to 42 EH/s by end of 2022.

Adding more overall mining power to secure Bitcoin is likely to continue, as miners have already committed to grow their hashrate over the course of this year. “We expect this rate of growth for the network hashrate (~8-9% monthly) to continue through FY22 despite the recent dip in BTC price because most of the larger mining companies have already placed the orders for the equipment they intend to deploy this year,” according to Jefferies’ Petersen.

He added that the average network hashrate increased by about 14 EH/s in February, and he expects about 5 EH/s to 10 EH/s of mining power to be brought online each month on average, if the North American public miners meet their 2022 hashrate targets. “However, it's also possible we could see even higher hashrate growth as certain technical innovations in the space come to fruition during the year,” he noted, citing new technologies such as immersion cooling and updated mining chips.

On the other hand, given the supply-chain constraints currently plaguing the industry, miners could fall short on reaching their expected hashrate addition this year, Hashrate Index cautioned. “With recent supply chain constraints and new power expansion delays among many of the public miners, though, there are no guarantees these companies will be able to achieve their promised hashrate expansion targets in 2022,” blog post said.

However, despite rising competition, network difficulty and bitcoin price off its peak, mining remains a very profitable business. North American miners are still achieving ~60-70% mining margins, according to Jefferies. This is of course a far cry from the peak of about 90% margins seen last year. Nonetheless, bitcoin mining is still a profitable industry.