USA overtakes China to become the top destination for Bitcoin miners
The U.S. is currently the leading destination for bitcoin miners, overtaking China for the first time. The U.S commands a third of bitcoin's hashrate, according to the Cambridge Centre for Alternative Finance, indicating a 428% rise since September 2020.
The U.S. is now the leading destination for bitcoin miners, overtaking China for the first time. While America was already rising in that direction, a new report from Cambridge University confirms the new change.
According to the Cambridge Centre for Alternative Finance, bitcoin's hashrate in the U.S was 35.4% by July, 35.4% of bitcoin's hashrate. This indicates a 428% rise from September 2020. Thanks to China, America now dominates the crypto mining industry.
Over a year ago, China was the market trendsetter concerning hashrate, and by a long shot. However, the country's cryptocurrency crackdown in the spring removed half of the global miners from crypto mining.
Miners began relocating from China all at once, traveling to affordable energy sources worldwide to create what was known as "the great mining migration." Most Chinese miners ended up in the USA.
Relocating to America
The U.S. has become a favorite destination for migrant bitcoin miners looking for a new home.
For instance, states such as Texas boasts some of the global most affordable energy costs, which is a key factor that many miners consider when competing for a low-margin industry, where the sole variable cost is usually energy.
The U.S. is home to multiple renewable power sources.
Washington state is a center for hydropwered mining farms, while New York generates more hydroelectric compared to most states. Still, the state boasts nuclear power plants that will enhance its objective to achieve 100% carbon-free power. At the same time, Texas' sources of renewables are thriving over time, for instance, the grid also continues to dramatically include more solar and wind power.
Miners throughout the U.S have also utilized nuclear power. This lowers greenhouse gas emissions and creates revenue for gas miners and providers.
This change toward zero-emission, by using new clean energy sources has started to change the narrative among pessimists that bitcoin is not good for the environment.
Apart from affordable electricity prices, some American states such as Texas also have pro-crypto policymakers and a substantial supply of infrastructure.
Texas' political leaders are pro-crypto, which is a good thing for miners looking for supportive policymakers and affordable energy sources.
Preparation has also helped the U.S. rise to the top since the country has been silently improving its hosting capacity for a long time.
Before bitcoin miners began relocating to America, firms across the country set up shop due to improved infrastructure.
When bitcoin plunged in late 2017 and the broader market experienced a multi-year crypto winter, and the demand for big bitcoin farms was low. U.S. mining operators observed their opening and grabbed at the opportunity to supply cheap money to establish the mining ecosystem in America.
The Covid -19 pandemic also played a key role due to the economic shutdown. The government-issued stimulus payments proved an advantage for U.S. mining firms.
According to bitcoin mining engineer Brandon Arvanaghi, "All the money printing during the pandemic meant that more capital needed to be deployed."
"People were looking for places to park their cash. The appetite for large-scale investments had never been bigger. A lot of that likely found its way into bitcoin mining operations in places outside of China," Arvanaghi added.
Best US states for Bitcoin miners
The best 5 states to mine Bitcoin in the U.S are Texas, North Dakota, Oklahoma, Tennessee & Washington.
Current data from the Global Energy Institute indicates the average price of electricity is low in these states.
Unlike the typical fiat currency, usually managed by a central bank, the blockchain has set regulations that govern the duration needed to create a new virtual currency unit.
Mining is done by solving hash functions or hashing, which requires massive amounts of computing power.
For large, established blockchains, such as those of bitcoin and Ethereum, the hash rate is mainly provided in trillions of hashes or terahashes per second (TH/s). According to blockchain.com, before China's crackdown, the hash rate reached more than 180 million TH/s on May 14 at more than 180 million TH/s, but the rate halved seven weeks later.
2021 has been an excellent year for Bitcoin mining in the USA as new equipment and talent flood the market. However, some states are more viable for Bitcoin mining than others.
To be profitable, mining crypto needs lots of cheap power. China was once the leading country globally for mining, with over half of global mining happening in the country. This was mainly due to its cheap electricity. But earlier this summer, regional governments in China started a crackdown on Bitcoin miners as the country worked to create its own, better-regulated virtual currency. The bitcoin processing power used to produce the crypto (hashrate) halved following the crackdown.
Although the cost of power isn't the only factor to consider when deciding where to establish a Bitcoin mining destination, it goes a long way.
Most miners usually compete in a low-margin industry, where energy is the only variable cost. Therefore, such minors are typically incentivized to migrate to the regions with the cheapest energy sources since the cost of power across America varies.
For instance, miners are likely to pay anywhere from 18 to 19 cents per kilowatt-hour in Connecticut and California. In contrast, according to the Global Energy Institute, they can pay less than half of that in Kentucky, Texas, Washington, and Wyoming. This institute lists an annual power price map of the USA, using the latest full year of data provided by the American Energy Information Administration.
However, the institute warns that "while the energy mix available in a particular state usually plays a significant role in state electricity prices, but energy-limiting regulations in some states tend to hike prices, making the price of power much higher for businesses and consumers."
Still, Bitcoin miners care more about finding affordable sources of electricity.
The cost of electricity explains why the U.S. proves more appealing to prospective miners since the country is a hub to some of the most affordable energy sources globally. Also, many energy sources in the USA tend to be renewable.
The CEO of Marathon Digital Holdings, Fred Thiel, and a cryptocurrency mining specialist, anticipates most upcoming miners will likely relocate to North America to seek renewable energy or gas and benefit from renewable energy credits.
Blockstream CEO Adam Back said that "Mining is price sensitive, so as to seek out the lowest-cost power and the lowest-cost power tends to be renewable because if you're burning fossil fuels ... it has extraction, refinement and transport costs,"
Texas is renowned for thriving renewable energy sources, including wind energy, while Washington State is a hub for hydro-powered mining farms.
However, electricity costs aren't everything; other factors such as sufficient infrastructure and friendly policymakers are also significant factors to consider when selecting the best Bitcoin mining destination.
First published on Oct 13, 2021