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Challenges to immersion adoption remain, including difficulties in reselling, moving, and financing immersed ASICs. Similarly, we expect to see an increase in the use of third-party firmware (the software that runs on machines themselves), as it provides a way for miners to optimize their hashrate and efficiency in a hardware-constrained environment. As far as optimizations go, firmware is particularly interesting because it typically does not require an additional capital investment; instead, it’s usually paid for through a developer fee that comes out of the machine’s increased hashrate.

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So long as the global chip shortage continues, larger operations will continue to carry an outsized edge in the market, even as gains in hardware efficiency slow. Because per-machine hashrate is increasing, rigs can be difficult to procure, and units are becoming more expensive, miners are beginning to use auxiliary capex to realize efficiencies in other parts of their operation. We’ll likely see spending increases on facilities, cooling, and other non-machine assets.

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Of the publicly announced debt raised by miners in 2021, $2.1bn (93%) came in the 4th quarter of the year. Miners raised a total of $3.9bn in publicly announced equity, of which private miners accounted for $1.5bn. The issuance of convertible notes was the most common type of debt issuance by bitcoin miners, with a total amount raised of $1.1bn. The equity capital markets were the largest source of financing for bitcoin miners.

By the middle of the year, the on crypto in China, historically the center of the mining industry, led to significant market volatility, but also a massive drop in hashrate that caused mining profitability to soar. This time, the shortages stemmed from covid-related supply chain disruptions that manifested in both higher prices and much longer delivery times. The year ended with another shortage, albeit less-intense than the shortage at the beginning of the year, affecting everything from machines to transformers. The ban briefly eased the hardware shortage as a large number of Chinese miners began selling their machines on secondary markets.