Miner Weekly: PP&E Spending Plunged in Q3

Nov 19, 2022

What does that mean for Bitcoin’s hashrate?

We noticed something interesting when going through Canaan’s Q3 earnings this week. There was a sharp decline in its contract liabilities, which dropped to just $42 million by Sept. 30. For comparison, it was nearly $280 million on March 31.

As you can notice from the chart below, Canaan’s contract liability at the start of a quarter has been indicative of its revenue for the quarter. According to this pattern, the Q4'22 revenue looks pessimistic.

The decline in contract liability of manufacturers also shows how mining companies are cutting down spending on equipment, at least for Avalon miners, even if the companies made prior pre-order commitments. Although Canaan isn’t the largest bitcoin mining equipment maker, it is reasonable to expect a similar trend for two of its biggest competitors, Bitmain and MicroBT.

Nine out of the 15 public mining companies that we regularly follow have published their financial statements for Q3’22. The total of their net purchases and deposits for Property, Plant, and Equipment (PP&E) during the past quarter dropped to $128 million, down 70% since Q2. Quite a few also reported gains from either the sale of machines or the return of their pre-paid order deposits.

Given this decreased PP&E spending by mining companies, we expect bitcoin’s network hashrate to slow down its growth—if there’s going to be any growth in the coming months at all! For now, it looks like the hashrate peaked at 270 EH/s and has already been trending down over the past week as bitcoin’s hashprice stays at all-time-low levels.