How the United States Became the New Global Bitcoin Mining Hub

Long before China decided to expel all of its bitcoin miners, they were already leaving en masse, and new data from the University of Cambridge shows they were likely headed for the United States.

The United States has quickly become the new darling of the bitcoin mining world. It is the second largest mining destination on the planet, accounting for nearly 17% of all bitcoin miners globally as of April 2021. That’s a 151% increase from September 2020.

“Over the past 18 months, we have seen significant growth in mining infrastructure in the United States,” said Darin Feinstein, founder of Blockcap and Core Scientific. “We have noticed a massive increase in mining operations seeking to relocate to North America, mainly to the United States”

This dataset does not include the mass mining exodus out of China, which has led to the disconnection of half of the world’s miners, and experts tell CNBC that the U.S. share of the mining market is likely even larger than the numbers don’t indicate it.

According to recently released Cambridge data, just before China’s mining ban began, the country accounted for 46% of the global hashrate, an industry term used to describe the collective computing power of the bitcoin network. This is a steep drop from 75.5% in September 2019, and the percentage is likely much lower given the ongoing exodus.

“500,000 ancient Chinese mining rigs are looking for homes in the United States,” said Fred Thiel of Marathon Digital. “If they are deployed, that would mean North America would have nearly 40% of the global hashrate by the end of 2022.”

America’s growing dominance is simply a case of preparing for a chance encounter. The United States has quietly built up its accommodation capacity for years.

Before bitcoin miners started coming to America, businesses across the country made a bet that if the proper infrastructure was in place, they would move to the United States.

This bet seems to be paying off.

When bitcoin collapsed in late 2017 and the broader market entered a multi-year crypto winter, there wasn’t much demand for the big bitcoin farms. American mining operators saw their openness and jumped at the chance to deploy cheap money to develop the mining ecosystem in the United States.

“Large publicly traded miners were able to raise capital to make big purchases,” said Mike Colyer, CEO of digital currency company Foundry, which has helped bring more than $ 300 million in mining equipment to America. North.

Companies like the North American crypto-mining operator Core Scientific continued to build hosting space throughout the crypto winter, so they had the capacity to plug in new equipment, according to Colyer.

“The majority of new equipment manufactured from May 2020 to December 2020 has been shipped to the United States and Canada,” he said.

Alex Brammer of Luxor Mining, a cryptocurrency pool designed for advanced miners, points out that the maturation of capital markets and financial instruments around the mining industry has also played an important role in the rapid rise of the industry in the United States. Brammer says many of these US operators were able to start growing rapidly once they secured funding by leveraging a multi-year history of profitability and existing capital as collateral.

The Covid also played a role.

Although the global pandemic shut down large swathes of the economy, the stimulus payments that followed proved to be a boon for U.S. mining companies.

“All the printing of money during the pandemic meant that more capital had to be deployed,” Bitcoin mining engineer Brandon Arvanaghi explained.

“People were looking for places to park their money. The appetite for large-scale investments had never been greater. Much of this probably ended up in bitcoin mining operations in places outside. from China, ”Arvanaghi continued.

The seeds of the American migration began in early 2020, according to Colyer. Before Beijing’s sudden crackdown, China’s mining dominance had already started to wane.

Part of the appeal is that the United States ticks a lot of the boxes for these migrant minors.

“If you are looking to move hundreds of millions of dollars of minors out of China, you want to make sure you have geographic, political and jurisdictional stability. You also want to make sure that there are private property rights protections for them. the assets that you move, ”Feinstein said.

It also helps that the United States is also home to some of the cheapest energy sources on the planet, many of which tend to be renewable. Because large-scale miners compete in a low-margin industry, where their only variable cost is usually energy, there is an incentive to migrate to the cheapest energy sources in the world.

Thiel expects most new miners who move to North America to be powered by renewables or by gas offset by renewable energy credits.

While Castle Island Ventures founding partner Nic Carter points out that US mining is not fully renewable, he says miners here are much better at selecting renewables and buying offsets.

“Migration is definitely a net positive overall,” he said. “Moving the hashrate to the United States, Canada and Russia will result in a much lower carbon intensity.”