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Amid Bitcoin's impending "halving," U.S. mining rigs migrate abroad seeking lower operational costs.
Bitcoin's 'Halving' Drives Exodus of Old US Mining Computers Abroad
Bloomberg (via MSN) reported that approximately 6,000 older Bitcoin mining machines in the United States will soon be idled and shipped to a warehouse in Colorado Springs. There, they will be refreshed and resold to buyers overseas looking to profit from mining in lower-cost environments.
SunnySide Digital, a wholesaler, operates the 35,000-square-foot facility, which accepts equipment from a mining client. It expects to receive and refurbish hundreds of thousands of outdated machines as part of a major quadrennial update to the Bitcoin blockchain.
The late April event, known as the halving, will reduce the reward that serves as the primary revenue stream for miners, who will attempt to mitigate the impact by upgrading to the most recent and efficient technology. With electricity being the most expensive, mining companies, including publicly traded behemoths Marathon Digital Holdings Inc. and Riot Platforms Inc., must reduce usage costs to maintain a positive margin. Their older computers may still be profitable, just not in the United States.
“It’s a natural migration” with buyers of the old machines operating in parts of the world where power is the cheapest, SunnySide Digital Chief Executive Officer Taras Kulyk, who has resold US computers to miners in countries such as Ethiopia, Tanzania, Paraguay, and Uruguay, said. “This is accelerated by the halving.”
According to Ethan Vera, chief operating officer of crypto-mining services and logistics provider Luxor Technology in Seattle, approximately 600,000 S19 series computers, which account for the majority of machines currently in use, are being shipped out of the United States, primarily to Africa and South America.
Specialized machines validate blockchain transactions in Bitcoin mining and pay operators a fixed token reward. Satoshi Nakamoto, the anonymous creator of Bitcoin, designed the once-every-four-year halving to keep the hard cap at 21 million tokens. Next month's event will be the fourth since 2012, with the reward dropping from 6.25 to 3.125 Bitcoin.
Bitcoin has increased by about 50% this year to around $63,500, although it is down from a record high of $73,798 set on March 14. With the halving just weeks away, bringing more efficient machines online has become more urgent, as continued use of older equipment may result in electricity costs approaching or exceeding mining revenue.
While the S19 series and similar models may no longer be profitable to run in the United States following the halving, they "can still generate decent profits and get an extended life if hosted" in parts of Africa, according to Jaran Mellerud, CEO of Dubai-based Hashlabs Mining. Hashlabs Mining leases data center space in Ethiopia and provides hosting services to Bitcoin miners.
According to Lauren Lin, Luxor's business development director, some buyers are waiting until after the event to buy older computers, expecting prices to fall even further. Luxor, which operates a trading desk for used machines, estimates that used S19 models will cost around $7,030 in March 2022. The price dropped dramatically a year later to around $900 as Bitcoin prices fell, then to around $427 this month, and is expected to sell for around $356 in May, following the halving.
Some miners in the United States choose not to sell their hardware; instead, they transfer it to regions with lower electricity costs and third-party data centers. Nuo Xu has two locations in Texas and is traveling to Ethiopia, Nigeria, and a few other countries this month to look for places to store approximately 6,000 older computers.
Iceland's Prime Minister Shifts Energy Use Away From Cryptocurrency Mining And TowardAgriculture
During an interview with the Financial Times (via Coingape), Iceland's Prime Minister, Katrín Jakobsdóttir, hinted at a plan to divert renewable energy resources. The emphasis will now be increasing food production rather than supporting the cryptocurrency mining industry. This move aims to increase food independence while expanding the grid so that renewable energy from power production can be used throughout Iceland's households and industries.
Iceland, known for its massive hydroelectric and geothermal power plants, has emerged as one of the world's leading energy exporters per capita. These green energy sources have become the primary reason for the country's position as a global leader in Bitcoin hash rate production. However, the government is now looking to prioritize other sectors over cryptocurrency mining.
Iceland's renewable energy sector has gained attention not only for being a leading green power producer but also for being a preferred destination for crypto miners from around the world. While the benefits of such technology are undeniable, the Prime Minister highlighted the energy consumption of data centers used by Bitcoin and other cryptocurrencies. Iceland is facing an energy shortage as a result of rising electricity demand and a lack of new power plants under construction.
According to Luxor, an industry research institute, the primary reason for Iceland's lack of cryptocurrency mining expansion is an energy shortage. Furthermore, the impending Bitcoin block reward halving has caused a global shift in the cryptocurrency mining landscape. In the decade since Bitcoin's inception, mining rigs have not only moved out of the United States to regions with lower energy costs, such as Africa and South America, but they have also improved their efficiency, increasing profitability.
As the crypto mining industry grows, energy prices become important when launching new crypto mining centers. Countries such as Ethiopia, Tanzania, Paraguay, and Uruguay now offer investors an appropriate location for Bitcoin mining companies. These areas' economies have lower operating costs, making them viable after halving.
Meanwhile, Iceland is looking inward, with the Prime Minister's push for agriculture signaling a significant shift. The initiative clearly reflects the concepts of import substitution and domestic benefit from using renewable energy. This strategy ensures Iceland's stable energy supply for the foreseeable future and strengthens the country's food independence in the face of global adversity.
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