Bitcoin miners in China have started to relocate their operations to U.S. states. like Texas, South Dakota and Tennessee.
United States, June 23, 2021 /AlexaBlockchain/ – The price of Bitcoin has tumbled after reports surfaced that China has strengthened its crackdown on cryptocurrency mining.
Numerous Bitcoin mines in Southwest China’s Sichuan Province were shut down as of Sunday, after orders by local authorities to halt mining in the region came late last week. The Sichuan Provincial Development and Reform Commission and the Sichuan Energy Bureau issued a joint notice on Friday, ordering local electricity companies to “screen, clean up and terminate” mining operations by Sunday.
According to a report from Global Times (China’s national English language newspaper) the ban means that more than 90% of China’s Bitcoin mining capacity is estimated to be shut down, at least for the short term, as regulators across the country have taken similar harsh steps.
The detailed explanation to the crackdown, however, is complex. Many financial and political analysts believe that the Chinese government has appeared uneasy not only about the industry’s carbon footprint but also the intrinsically uncontrollable, decentralized nature of cryptocurrency.
Why Does it Matter?
In the early days, when it was still viable to mine Bitcoin with a home laptop, a large proportion of crypto mining took place in the U.S. But as the computer power needed to solve the math problems increased, Chinese mining operations came to dominate.
The Chinese miners enjoyed two advantages: easy access to cheap power, including in places like Mongolia, and a domestic manufacturing base capable of cranking out so-called mining rigs—computers with custom chips made just for mining. While there are other mining operations around the globe, China remains far and away the leader, as can be seen in this chart from the Cambridge Centre for Alternative Finance. The chart below shows the average monthly hashrate breakdown by country in descending order.
Bitcoin Mining Revenue
Data from Finbold indicates that bitcoin miners earned $1.45 billion in May, dropping only 15.01% from the April figure of $1.7 billion. The revenue dropped slightly considering bitcoin suffered a significant price correction of about 36% in May. Between March and April, the revenue slightly plunged 2.5% from $1.75 billion to $1.7 billion.
Over the last three months, the highest daily bitcoin mining revenue was on April 15th at $77 million. The lowest returns were recorded on May 29th at $26 million.
Impact of Chinese Crackdown on the US Crypto Mining Industry
Although the crackdown in China partly contributed to the slump in bitcoin mining revenue, the full effect might be exhibited in June. However, the exercise should pick up, especially with renewed efforts to cement other markets like North America. The region is ramping up to dominate bitcoin mining with a focus on using renewable energy.
As a result of China’s shifting regulatory approach towards Bitcoin and cryptocurrencies in general, Bitcoin miners in China are looking to relocate their operations to U.S. states like Texas, South Dakota and Tennessee, The Washington Post reported.
US States Attempt to Woo Chinese Crypto Miners to Boost Local Economy
Energy, at least in certain states, is relatively cheap. What’s more, the U.S. has a much more stable political climate than many Asian and Middle Eastern countries with similarly cheap energy.
Some U.S. states are even implementing policies to support crypto miners in the hopes of boosting their local economies.
“You are going to see a dramatic shift over the next few months,” Brandon Arvanaghi, previously a security engineer at crypto exchange Gemini, said. According to CNBC. “We have governors like Greg Abbott in Texas who are promoting mining. It is going to become a real industry in the United States, which is going to be incredible.”
In March, the Kentucky state legislature approved a pair of laws offering tax breaks to crypto miners. Senate Bill 255 and House Bill 230 were both signed by Kentucky Governor Andy Beshear on March 25th 2021. The former bill will extend clean energy-focused incentives to miners investing at least $1 million in crypto mining equipment, while the latter will remove sales tax obligations from electricity purchased for crypto mining.
Beshear and the Kentucky state legislature hope attracting crypto miners will increase business revenue and job opportunities for Kentuckians left behind in a manufacturing exodus.
Meanwhile, Mayor Francis Suarez of Miami, Florida has recently announced that his administration is talking to Chinese mining companies about relocating to the city, highlighting Miami’s large supply of cheap nuclear energy.
Suarez has said he is working with Florida Power & Light Company to drive down the price of energy in Miami even further, and is considering creating enterprise zones – that is, areas with particular tax concessions and scaled-back regulations – specifically for crypto mining.
Texas is another ideal destination for crypto miners due to its cheap electricity and crypto-friendly political environment.
The Texas Department of Banking announced in early June that state-chartered banks are now allowed to store crypto assets on behalf of clients. The Texas state legislature also passed a bill amending the Texas Uniform Commercial Code to add “virtual currency,” establishing a legal framework for cryptocurrency investing in Texas.
Wyoming has a similarly cheap energy mix and is in the midst of adopting multiple crypto-friendly policies.
In April, Wyoming Gov. Mark Gordon signed a bill giving legal status to decentralized organizations operating using blockchain. Additionally, multiple laws in 2018 and 2019 laid the groundwork for a new type of banking charter issued to banks dealing primarily with digital assets.
Because of Wyoming’s wave of crypto friendly policies in the past few years, many crypto companies have recently moved their headquarters to Wyoming’s capital, Cheyenne, including crypto exchange Kraken, one of the world’s largest.
Updates on Key Players in The US Bitcoin Mining Industry
- ISW Holdings Inc.
- Argo Blockchain plc
- Diginex Limited
- Bit Digital, Inc.
- Marathon Digital Holdings, Inc.
ISW Holdings Inc. (OTC: ISWH) and Bit5ive, LLC, recently provided an in-depth update on the Company’s progress as it continues to expand and optimize its cryptocurrency mining operations.
“ISW Holdings operates as a diversified holdings company with a current market cap of approximately $25 million driven largely by the Company’s growing expertise in acquiring, launching, hosting, and operating assets in the cryptocurrency and telehealth sectors,” noted ISW Holdings President and Chairman, Alonzo Pierce. “Our partnership with Bit5ive has provided us with a state-of-the-art POD5 infrastructure and the ability to develop efficient and expandable mining operations. And we look forward to further expansion and optimization in this domain over coming months.”
The Company currently operates its mining equipment adjacent to powerful and efficient energy resources in Kennerdell, PA.
Pierce added, “We continue to make huge progress, recently increasing our hashrate to 72,000 Th/s, driving an expected $484,000 in monthly revenue – or over $5.8 million annually – through the Bitmain Antminer s17 fleet we already have online and working. As we continue to maximize our hashrate, we should see a reduction in proportional direct costs associated with mining operations. Naturally, we continue to lean on Robert and Bit5ive for expertise and support in translating our investment in this process into growing value.”
Bit5ive is North America’s largest provider of collective management services and mining equipment along with ISWH with a turnkey solution on delivering cost-efficient and reliable hosting, distribution of mining equipment, complete facility management, and mining pool operations in projects to be announced.
Robert Colazzo of Bit5ive commented, “Due to our strong partnership, ISW Holdings will continue to benefit from 24/7 technician support in handling monitoring, troubleshooting, upgrades, firmware management and more. Bit5ive is excited to have the opportunity to provide our wealth of experience in managing Bitcoin mining farms across the US and internationally, and we look forward to achieving great success together.”
Argo Blockchain plc (OTCQX: ARBKF) reported earlier this month an operational update according to which during the month of May, Argo mined 166 Bitcoin or Bitcoin Equivalent (together, BTC) compared to 163 BTC in April. This brings the total amount of BTC mined year-to-date to 716 BTC. Based on daily foreign exchange rates and cryptocurrency prices during the month, mining revenue in May amounted to USD 7.8 Million (April 2021: USD 9.3 Million). Argo generated this income at an average monthly mining margin of approximately 82% for the month of May despite fluctuations in mining difficulty. (April 2021: 85%). “May has been a busy month. We have continued to deliver strong revenue and as a result, Argo’s Bitcoin holding has now surpassed 1,000 BTC” Peter Wall, Chief Executive of Argo said. “We are also delighted to have signed the Crypto Climate Accord and to have been involved in the creation of the Bitcoin Mining Council. These initiatives have the potential to enact systemic change within our sector and speed up the rate at which miners switch to renewable energy to power their operations. We are also pleased to announce Argo’s strategic investment into WonderFi. Access to this emerging sector needs to be democratised and we believe WonderFi is in an excellent position to achieve this.”
Diginex Limited (NASDAQ: EQOS) announced earlier this month that EQUOS, its cryptocurrency exchange has been awarded an “A+” ranking on Nomics, one of the leading independent crypto exchange data providers. As a regulatory-focused exchange, EQUOS is committed to bringing transparency, fairness and trust to the crypto industry. EQUOS’ ranking on Nomics places the exchange in the Top 20 crypto exchanges globally, and Top 5 in Asia, for both transparency and volumes, despite the exchange only launching publicly in July 2020. EQUOS continues to deliver record daily volumes and exceeded USD 3 Billion in volumes for the month of May 2021. This represents a daily average volume of over USD 100 Million in May 2021, an increase of 70% compared to April 2021, and over seven times the average daily volumes in the first quarter of calendar 2021.
Bit Digital, Inc. (NASDAQ: BTBT) reported this month that the Company has entered into a strategic co-mining agreement with Digihost Technologies in North America. Pursuant to the terms of the Agreement, Digithost will provide certain premises to Bit Digital for the purpose of the operation and storage of a 20 MW Bitcoin mining system (the “Miners”) to be delivered by Bit Digital, and Digithost will also provide services to maintain the Premises for a term of two years. The collaboration between Digihost and Bit Digital is expected to generate an increase in hashrate of approximately 400 PH between the companies. Bryan Bullett, Bit Digital’s CEO, stated: “We are extremely pleased by this strategic collaboration with Digihost which marks our ongoing expansion in North America, as we continue to transition our mining fleet here. Our business strategy continues to encompass growth through the expansion of strategic partnerships with institutional-quality hosting providers with aligned economic interests, to secure efficient access to power and hosting. We look forward to a successful partnership with Digihost.”
Marathon Digital Holdings, Inc. (NASDAQ: MARA) published earlier this month unaudited bitcoin (“BTC”) production and miner installation updates for May 2021. As of June 1st, 2021, Marathon’s mining fleet has produced approximately 580.5 newly minted bitcoins during 2021. As a result, Marathon currently holds approximately 5,518 BTC, including the 4,812.66 BTC the Company purchased in January 2021 for an average price of USD 31,168 per BTC. On May 31, 2021, the fair market value of one bitcoin was approximately USD 36,857, implying that the approximate fair market value of Marathon’s current bitcoin holdings is approximately USD 203.4 Million.
Other Important Players in Crypto Mining Industry
It’s not only about mining firms, but there are several other key players in the market. For example, Nvidia which is a key supplier of CMP (Cryptocurrency Mining Processor) cards, recorded $155 million in revenue from CMP cards in its fiscal first quarter, which ended May 2, and expected sales of $400 million in the current quarter.
