I hope that May is off to a great start for you. As April draws to a close, we're excited to share with you some of the key happenings across Bitcoin and Oil & Gas from the month.
Natural gas (HHUB) saw a slight rebound (+7%) from March lows, while both metrics in the Bitcoin category ($/BTC and In-Field Computing) slid notably. Taking the biggest hit was In-Field Computing, with a 57% (-$11.95) decrease from March's record highs. You might be wondering what caused such a significant drop in a single month, and what this means for the future of In-Field Computing. The answer is actually fairly straightforward and, disconcerting as it may seem, the price drop last month actually speaks to a feature and not a flaw in the system.
To unpack that just a bit -- the decrease in $/Mcf generated from IFC is attributed to what's known in Bitcoin Mining as "The Halving". The Halving is an overnight 50% reduction in the new issuance of Bitcoin. This event is programmatically built into Bitcoin's original protocol (or code) and reoccurs every 4 years until all 21 million Bitcoin are mined. I repeat - because it is vital to understanding Bitcoin's value proposition - there will only ever be 21 million Bitcoin.
Calculable and predictable, we know that the last Bitcoin will be mined in the year 2140 (not a typo, we have 116 years to go!). Because the amount of new Bitcoin supply is being cut in half, and because miners' payment is determined by the amount of Bitcoin produced, the revenue generated from Bitcoin mining is effectively halved overnight. Sounds like bad news, right? Fortunately, that's not the end of the story. The real beauty behind Bitcoin's perfectly scarce nature is displayed as economic principles play out post-halving. Given the deflationary nature of the event (i.e, constrained supply of new Bitcoin), and as demand continues to increase, the value of Bitcoin should also continue to increase. As Bitcoin price responds in these post-halving market conditions, so too will mining revenue; all the while fortifying Bitcoin’s “hard money” characteristics.
If you're interested in learning more about The Halving and its relationship with mining revenue, I encourage you to check out the attached resource we released earlier this year, titled: “360 Mining and the April 2024 Halving”
Despite the moderate uptick in HHUB spot price last month, the outlook for natural gas remains largely unexciting. Dry gas prices in 2Q24 are expected to remain under $2/Mcf, with the year average targeted at $2.20, per the EIA. Low natural gas prices are impacting production, with expectations of a 2% decline from 1Q24 to 2Q24, according to the EIA. The anticipated reductions come as a result of curtailment in response to consistently low prices, as announced publicly by EQT and others. Reduced production persists, despite increasing demand across the residential, commercial, and electric power generation markets.
There will only ever be 21 million Bitcoin. Declining rates of new supply coupled with increasing demand, suggests an increasing valuation of the commodity.
Natural gas revenue continues to be distressed amidst sustained sub-$2 HHUB
Even in the most draconian, all-time-low environment for In-Field Computing, it still offers a 5x uplift vs HHUB
We’ll call that a wrap! Tune in next month for the next 360 Mining Industry Update, where we help you keep a finger on the pulse of all things Bitcoin + O&G. If you’re interested in discussing the points shared here, or would like to explore how In-Field Computing could fit into your operations, drop me a line.
View page 43 of the Spring 2024 Edition of NAPE Magazine to check out the latest piece from 360 Mining CEO, Chris Alfano.
